SCHEDULE 14C

INFORMATION REQUIRED IN INFORMATION STATEMENT

SCHEDULE 14C INFORMATION

      Check the appropriate box:

        Preliminary information statement

		Confidential, for Use of the Commission Only (as permitted by Rule  14a-6(e)(2))

        Definitive information Statement

Payment of filing fee (Check the appropriate box):

        No fee required.

        Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.

      (1)  Title of each class of securities to which transaction applies:

Common Stock, $.01 par value per share, of

      (2)  Aggregate number of securities to which transaction applies:

45,894,753

      (3)  Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

$42.00 per share (Cash consideration per share to be received by the Registrant’s stockholders)

      (4)  Proposed maximum aggregate value of transaction:

$1,927,579,626.00 (Excludes 46,197,466 shares held by Flowers Industries, Inc. for which cash consideration will be paid to its shareholders. A filing fee of $251,320.00 has previously been paid with respect to the estimated cash consideration to be paid to Flowers shareholders.)

      (5)  Total fee paid:

$385,516.00

        Fee paid previously with preliminary materials.

        Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

      (1)  Amount previously paid:

      (2)  Form, schedule or registration statement no.:

      (3)  Filing party:

      (4)  Date filed:

677 LARCH AVENUE

Dear Stockholder:

      The Board of Directors of Keebler Foods Company has approved a merger agreement which provides for the acquisition of our company by Kellogg Company for $42.00 per share in cash.

      In order to evaluate the advisability of the merger, our Board of Directors formed a special committee of the Keebler Board, consisting of three independent directors. The special committee has unanimously determined that the merger and the merger agreement are fair to and in the best interests of Keebler’s stockholders, other than Flowers Industries, Inc., our controlling stockholder, about which the special committee made no determination. In its evaluation of the merger, the special committee considered the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, its financial advisor, to the effect that, as of the date of Merrill Lynch’s opinion, the cash consideration of $42.00 per share to be received pursuant to the merger by the stockholders of Keebler is fair from a financial point of view to such stockholders, other than Flowers, Kellogg and their respective affiliates. Merrill Lynch’s opinion is subject to the assumptions, limitations and qualifications set forth in its written opinion, which is attached as Annex C to the enclosed information statement.

      Please read the attached information statement for information about the merger and the related transactions. The proposed merger requires approval by a majority of the voting power of all outstanding shares of Keebler. We are not asking you to vote on the merger or the merger agreement. Flowers, our controlling stockholder, has agreed to act by written consent and vote its shares of Keebler stock in favor of the adoption of the merger agreement and approval of the merger, twenty-one days after the date of mailing of this information statement. This action by Flowers will be sufficient for the stockholders of Keebler to adopt the merger agreement and approve the merger without the vote of any other stockholder of Keebler. Accordingly, your approval is not required and is not being sought.

      Please do not send in your share certificates at this time. Promptly after the merger is completed, you will receive a letter of transmittal for that purpose.

      We appreciate your support.

Sincerely,

Information statement dated             , 2001 and first mailed to stockholders on or about             , 2001.

677 LARCH AVENUE

INFORMATION STATEMENT

WE ARE NOT ASKING YOU FOR A PROXY

      This information statement is being furnished to the holders of common stock, $0.01 par value, of Keebler Foods Company in connection with the proposed acquisition of the company by Kellogg Company. The acquisition will be effected by the merger of a wholly-owned subsidiary of Kellogg with Keebler pursuant to an Agreement and Plan of Merger dated as of October 26, 2000 among Keebler, Kellogg and the merger subsidiary.

      Under the merger agreement, at the effective time of the merger, each outstanding share of Keebler common stock, other than shares held by Flowers Industries, Inc. (except as described below) or as to which appraisal rights have been properly exercised, will be converted into the right to receive $42.00 in cash. Flowers, our controlling stockholder, and Kellogg have also entered into a separate merger agreement providing for the acquisition by Kellogg of all of the outstanding shares of Flowers. If the Kellogg/ Flowers merger is not consummated but we complete our merger with Kellogg, then upon completion of our merger each outstanding share of Keebler common stock, including shares held by Flowers but excluding shares as to which appraisal rights have been properly exercised, will be converted into the right to receive the $42.00 per share cash price.

      The proposed merger requires approval by a majority of the voting power of all outstanding shares of Keebler stock. We are not asking you to vote on the merger or the merger agreement. Flowers, the controlling stockholder of Keebler, which owns shares representing approximately 54% of the outstanding voting stock of Keebler, has agreed to act by written consent and vote its shares of Keebler stock in favor of the adoption of the merger agreement and approval of the merger, twenty-one days after the date of mailing of this information statement. This action by Flowers will be sufficient to ensure that a majority of the stockholders of Keebler adopt the merger agreement and approve the merger without the vote of any other stockholder of Keebler. Accordingly, your approval is not required and is not being sought.

TABLE OF CONTENTS

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      The following is a summary of the material information from this information statement and may not contain all of the information that is important to you. To understand the merger fully and for a more complete description of the legal terms of the merger, you should carefully read this information statement and the documents to which we refer you. Additional information about Keebler has been filed with the SEC and is available upon request without charge, as described under “Where You Can Find More Information” on page      .

The Merger

      This information statement relates to the acquisition of Keebler by Kellogg for $42.00 in cash per share of Keebler stock, through the merger of a wholly-owned subsidiary of Kellogg with Keebler.

The Companies

Keebler Foods Company

      Keebler Foods Company and its subsidiaries are the second largest cookie and cracker manufacturer in the United States with annual net sales of $2.7 billion and a 25.4% share of the United States cookie and cracker market. We market a majority of our products under well-recognized brands such as KEEBLER, CHEEZ-IT, CARR’S and FAMOUS AMOS. In the United States, we are the number two manufacturer of branded cookies and crackers, the leading licensed supplier of Girl Scout cookies, the number one manufacturer of private label cookies and the number one manufacturer of crackers for the foodservice market. We are also the leading manufacturer of retail branded ice cream cones in the United States and a major producer of retail branded pie crusts. In addition, we produce custom-baked products for other marketers of branded food products.

Kellogg Company

      Kellogg was incorporated in Delaware in 1922. Kellogg is the world’s leading producer of ready-to-eat cereal and a leading producer of grain-based convenience foods, including toaster pastries, cereal bars, frozen waffles, and meat alternatives. Its products are manufactured in 20 countries and marketed in more than 160 countries around the world. Its icons, such as Tony the Tiger® and Snap®, Crackle® and Pop® are among the most recognized in advertising.

Reasons for the Merger (See Page   )

      In order to maximize shareholder value, Flowers, our controlling stockholder, in conjunction with us, conducted an auction for the sale of Keebler. The Keebler Board believes that the proposed merger is fair to and in the best interests of Keebler and its stockholders. A special committee of independent directors of the Keebler Board carefully reviewed and considered the auction process which was conducted for the sale of Keebler and the terms and conditions of the merger and the merger agreement which resulted from that process, as well as the terms and conditions of the Flowers voting agreement and the Kellogg/ Flowers merger agreement. The Keebler special committee unanimously determined that the merger and the merger agreement are fair and in the best interests of Keebler stockholders other than Flowers, about which the Keebler special committee made no determination. The Keebler Board unanimously approved the form, terms and provisions of the merger and the merger agreement, determined that the merger is fair to and in the best interests of Keebler and its public stockholders, approved and declared the merger and the merger agreement advisable and recommended that Keebler’s stockholders approve and adopt the merger and the merger agreement. Important factors in the Keebler Board’s determination included the

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      The reasons for the merger are described in greater detail under “The Merger — Keebler’s Reasons for the Merger; Recommendation of the Special Committee and the Keebler Board of Directors.”

Interests of Officers and Directors in the Merger (See Page   )

      You should be aware that a number of Keebler officers and directors may have interests in the merger that are different from, or in addition to, yours, as described under “Interests of Officers and Directors.”

Legal Documents (See Annexes A and B)

      The merger agreement and the related Flowers voting agreement are attached as Annex A and Annex B to this information statement. We encourage you to read these agreements as they are the legal documents that govern the merger.

Consideration (See Page  )

      In the merger, each share of Keebler common stock outstanding immediately prior to the completion of the merger, except for shares held by Flowers (unless in certain circumstances discussed below where the Kellogg/Flowers merger is not completed) or as to which appraisal rights have been properly exercised, will be exchanged for $42.00 in cash. Additionally, immediately prior to the completion of the merger we will declare a special cash dividend in the aggregate amount of $16 million to be paid pro rata to all Keebler stockholders, including Flowers.

      Stockholder Vote Required to Approve the Merger and Adopt the Merger Agreement (See Page   )

      Approval of the merger and adoption of the merger agreement requires approval by a majority of the voting power of all outstanding shares of Keebler common stock. Flowers, our controlling stockholder, has entered into a voting agreement with Kellogg with respect to the merger, which provides that, on the 21st day after the date on which this information statement is mailed to Keebler stockholders, Flowers will vote by written consent all of its Keebler shares in favor of the approval of the merger and adoption of the merger agreement. To ensure compliance with its obligations under the voting agreement, Flowers has granted Kellogg an irrevocable proxy with respect to its Keebler shares. The approval by Flowers, our controlling stockholder, is the only approval from Keebler stockholders required to approve the merger and adopt the merger agreement.

Opinion of Financial Advisor (See Page   )

      In making its determination with respect to the merger and the merger agreement, the Keebler special committee considered, among other factors, the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, or Merrill Lynch, its financial advisor. The Keebler special committee received a written opinion dated October 26, 2000 from Merrill Lynch to the effect that the cash consideration to be received by Keebler stockholders is fair from a financial point of view to such stockholders, other than Flowers, Kellogg and their respective affiliates. The opinion, which is attached as Annex C to this information statement, sets forth assumptions made, matters considered and limitations on the review undertaken in connection with the opinion.

Regulatory Approvals (See Page   )

      The merger cannot be completed until the waiting period under the Hart-Scott-Rodino Act, or HSR Act, has expired or been terminated.

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Conditions to the Merger (See Page   )

      The obligation of Keebler and Kellogg to complete the merger is subject to the satisfaction or waiver of the following conditions:

	•	approval and adoption of the merger agreement by Keebler’s stockholders;
	•	consummation of the Kellogg/Flowers merger (which condition is deemed satisfied if Flowers’ shareholder approval of the Kellogg/Flowers merger is not received by June 15, 2001, if the special meeting of Flowers’ shareholders held to vote on the Kellogg/Flowers merger (including any adjournment) concludes without approval of the Kellogg/Flowers merger from Flowers’ shareholders having been obtained, or if Flowers fails to perform or comply in any material respect with any obligation, agreement or covenant of Flowers to be performed or complied with under the Kellogg/Flowers merger agreement so that Kellogg’s conditions to consummation of the Kellogg/Flowers merger cannot be satisfied);
	•	the absence of any federal, state or foreign statute, rule, regulation, executive order, decree or injunction prohibiting the consummation of the merger;
	•	expiration or termination of any applicable waiting period under the HSR Act or any applicable foreign competition laws or regulations;
	•	accuracy of the representations and warranties made by the other party to the extent specified in the merger agreement; and
	•	performance in all material respects by the other party of the obligations required to be performed by it under the merger agreement at or prior to closing.

      Kellogg’s obligation to complete the merger is also subject to the satisfaction or waiver of the following additional conditions:

	•	receipt of all required consents and approvals of governmental entities, except those that, if not received, would not have a material adverse effect on Keebler or Kellogg;
	•	the employment agreements with certain members of Keebler’s management, which have already been entered into in connection with the merger, are in full force and effect; and
	•	as of immediately prior to the effective time of the merger, holders of not more than 10% of Keebler’s outstanding shares have taken actions under Delaware law to assert appraisal rights.

Termination; Fees (See Page   )

      Keebler and Kellogg may mutually agree, at any time prior to the completion of the merger, to terminate the merger agreement. In addition, either Keebler or Kellogg may terminate the merger agreement if:

	•	the merger has not been completed by June 30, 2001;
	•	there is a permanent legal prohibition, including a final and non-appealable court order or injunction, barring the completion of the merger; or
	•	the merger agreement is not approved and adopted in accordance with Delaware law by Keebler’s stockholders.

      Kellogg may terminate the merger agreement if:

	•	Keebler fails to perform in any material respect any obligation or breaches its representations and warranties under the merger agreement, in each case, such that Kellogg’s conditions in the agreement cannot be satisfied and Keebler fails to cure such breach within 15 business days after receipt of notice from Kellogg;

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      Keebler may terminate the merger agreement if:

	•	Kellogg fails to perform in any material respect any obligation or breaches its representations and warranties under the merger agreement, in each case, such that Keebler’s conditions in the agreement cannot be satisfied and Kellogg fails to cure such breach within 15 business days after receipt of notice from Keebler;

      Keebler has agreed to pay Kellogg $57.8 million in cash in the event the merger agreement is terminated under the circumstances described under “Merger Agreement — Termination Fees.”

Material U.S. Federal Income Tax Consequences of the Merger (See Page   )

      The receipt by a Keebler stockholder of cash for Keebler shares will be a taxable transaction for United States federal income tax purposes. A Keebler stockholder generally will recognize gain or loss in an amount equal to the difference between the cash received by the stockholder and the stockholder’s tax basis in the Keebler shares surrendered in the merger. That gain or loss will be a capital gain or loss if the Keebler shares are held as a capital asset by the stockholder. Because the tax consequences of the merger may vary depending upon your particular circumstances, we recommend that you consult with your tax advisor regarding the tax consequences of the merger.

Appraisal Rights (See Page   )

      You will be entitled to appraisal rights under Section 262 of the Delaware General Corporation Law in connection with the merger so long as you take all steps necessary to perfect those rights. Section 262 is reprinted in its entirety as Annex D to this information statement.

      You should review Annex D carefully if you want to exercise statutory appraisal rights or wish to preserve your right to do so, because failure to comply strictly with the procedures set forth in Annex D may result in the loss of your appraisal rights. You should not take any action at this time to exercise your appraisal rights. We will send you a notice of appraisal rights at a later date that will describe the timing of any action you will be required to take to exercise your appraisal rights.

Relationship with Flowers Industries (See Page   )

      Flowers is our controlling stockholder, owning shares representing approximately 54% of the outstanding voting stock of Keebler. In addition, five members of Keebler’s Board serve on the Flowers Board of Directors and a sixth member of Keebler’s Board is an officer of Flowers. Flowers has entered into a voting agreement with Kellogg in which it has agreed to vote its Keebler shares in favor of the adoption of our merger agreement with Kellogg and approval of our merger with Kellogg, such that approval of any other Keebler stockholder will not be required or sought in connection with the merger.

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General

      The Keebler Board is using this information statement to inform Keebler’s public stockholders about the proposed acquisition of Keebler by Kellogg and the related transactions. The Keebler Board has unanimously approved the merger and the merger agreement.

      The proposed acquisition will occur pursuant to the Agreement and Plan of Merger dated as of October 26, 2000 among Keebler, Kellogg and FK Acquisition Corp., a wholly-owned subsidiary of Flowers. We refer to this agreement as the “merger agreement” or the “Kellogg/ Keebler merger agreement” in this information statement. Under the merger agreement, Keebler will merge with FK Acquisition Corp. or another wholly-owned subsidiary of Kellogg designated by Kellogg and all outstanding shares of Keebler, other than those held by Flowers (except under the circumstances described below where the Kellogg/ Flowers merger is not consummated) or as to which appraisal rights have been properly exercised, will at the effective time of the merger be converted into the right to receive $42.00 in cash per share. The separate existence of the merger subsidiary will cease and Keebler will become a wholly-owned subsidiary of Kellogg.

      Flowers has agreed, as our controlling stockholder, to vote its Keebler shares in favor of the approval and adoption of the merger agreement and approval of the merger. Since Flowers holds approximately 54% of the outstanding voting stock of Keebler and the favorable vote of a majority of the outstanding shares of Keebler stock is required for stockholder approval and adoption of the merger agreement and the merger, no approval by the Keebler public stockholders is required or will be sought. Flowers’ obligation to vote in favor of the merger agreement, and against any competing proposals or transactions, is set forth in the Flowers voting agreement which is described in “Flowers Voting Agreement” and attached as Annex B to this information statement.

Company Information

  Keebler Foods Company

      Keebler and its subsidiaries are the second largest cookie and cracker manufacturer in the United States with annual net sales of $2.7 billion and a 25.4% share of the U.S. cookie and cracker market. We market a majority of our products under well-recognized brands such as KEEBLER, CHEEZ-IT, CARR’S and FAMOUS AMOS. In the United States, we are the number two manufacturer of branded cookies and crackers, the leading licensed supplier of Girl Scout cookies, the number one manufacturer of private label cookies and the number one manufacturer of cookies and crackers for the foodservice market. We are also the leading manufacturer of retail branded ice cream cones in the United States and a major producer of retail branded pie crusts. In addition, we produce custom-baked products for other marketers of branded food products.

  Kellogg Company

      Kellogg, incorporated in Delaware in 1922, and its subsidiaries are engaged in the manufacture and marketing of ready-to-eat cereal and grain-based convenience food products on a worldwide basis. These products are manufactured in 20 countries and marketed in more than 160 countries around the world. Kellogg’s icons, such as Tony the Tiger® and Snap®, Crackle® and Pop® are among the most recognized in advertising. Kellogg’s products are generally marketed under the KELLOGG’S® and MORNINGSTAR FARMS® names and are sold principally to the grocery trade through direct sales forces for resale to consumers. Kellogg uses broker and distribution arrangements for certain products as well as in less-developed market areas. In the United States, in addition to ready-to-eat cereals, Kellogg produces and distributes toaster pastries, frozen waffles, frozen pancakes, crispy marshmallow squares, cereal bars, and meat alternatives. Kellogg also markets these and other convenience food products in various locations throughout the world, including Canada, Mexico, Europe, and Australia.

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Background of the Transactions

      During the second half of 1999 and the first four months of 2000, Flowers’ management and the Flowers Board, with the assistance of its financial and legal advisors, considered and evaluated a wide range of strategic alternatives to restructure Flowers with a view toward maximizing value to its shareholders. These discussions arose primarily as a result of the following:

	•	adverse operating performance of Flowers due primarily to a mechanical breakdown of newly constructed production facilities at Mrs. Smith’s Bakeries, which significantly impaired Flowers’ earnings for the last three quarters of 1999 and continued to do so in 2000;
	•	operational problems at Mrs. Smith’s Bakeries, a subsidiary of Flowers, resulted in significantly increased financial leverage and overshadowed continued good results from Flowers Bakeries, another subsidiary of Flowers, and Keebler;
	•	Flowers’ belief that its 54% ownership position in Keebler negatively impacted the market price of Keebler’s stock;
	•	Flowers’ financial flexibility was limited due to its practical inability to access Keebler’s cash flows; and
	•	commencing in the first half of 2000, the food industry was experiencing a surge of consolidation, as evidenced by The Philip Morris Companies Inc.’s acquisition of Nabisco Holdings Corp., Unilever N.V.’s acquisition of Bestfoods and ConAgra Foods, Inc.’s acquisition of International Home Foods, Inc.

      Beginning in May 2000, Flowers, with its financial, legal and accounting advisors, explored a number of alternatives that could capitalize on the industry consolidation trend, eliminate any potential negative consequences of Flowers’ majority ownership of Keebler, reduce Flowers’ financial leverage and maximize the value of the Keebler investment in a tax-efficient manner. These alternatives included:

	•	a reverse merger of Flowers into Keebler;
	•	a sale of Flowers; and
	•	a direct sale of Flowers’ shares of Keebler stock.

      The reverse merger or the sale of Flowers in its entirety, which would have included Flowers’ traditional bakery businesses, were both viewed by Flowers as unattractive because the Flowers Board believed that those structures did not present the opportunity to maximize shareholder value inasmuch as the Flowers Board believed it was not an optimal time to sell its traditional bakery operations. The direct sale of Flowers’ shares of Keebler stock was viewed by Flowers as unattractive because of the significant corporate tax burden on Flowers that such a sale would create. As a result of these factors, Flowers determined to explore a transaction in which Flowers’ operating divisions (Flowers Bakeries and Mrs. Smith’s Bakeries) would be spun off to Flowers’ shareholders in a taxable distribution and, as part of the same transaction, Flowers, whose primary asset would then be its shares of Keebler stock, would be sold in a transaction structured as a merger. This was viewed by Flowers as a transaction that would maximize the return for Flowers’ shareholders on its investment in Keebler while also reducing the financial leverage burden for the spun-off bakery businesses. Flowers’ management, with the assistance of its advisors, analyzed and developed this structure during May and June 2000.

      On June 28, 2000, the Flowers Board met with representatives of Morgan Stanley & Co. Incorporated and UBS Warburg LLC, and with Jones, Day, Reavis & Pogue, its legal counsel. After a lengthy discussion of all of the alternatives available to Flowers to maximize shareholder value, the Flowers Board authorized further exploration of the combined spin-off and merger transaction and the formal engagement of Morgan Stanley and UBS Warburg, and determined to inform senior management and the independent directors of Keebler of the proposed course of action.

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      On July 6, 2000, Robert P. Crozer, vice chairman of the Flowers Board and chairman of the Keebler Board, met with Sam K. Reed, president and chief executive officer of Keebler, along with other members of Keebler’s senior management, and outlined the proposed transaction and addressed questions regarding Flowers’ plans.

      On July 10, 2000, Keebler requested that Merrill Lynch provide the Keebler Board with an independent assessment of food industry valuations and consolidation.

      On July 12, 2000, the Keebler Board held a meeting at which Morgan Stanley and UBS Warburg met with the Keebler Board and discussed the alternatives available to Keebler to maximize Keebler stockholder value. At that same meeting, Merrill Lynch discussed the food industry and recent consolidations and gave a preliminary overview of valuation and potential buyers. Keebler management also made a presentation to the Keebler Board in which Keebler’s management concluded that it was the appropriate time for a sale of Keebler to occur.

      On July 18, 2000, the Flowers and Keebler Boards met separately and each authorized its management team and advisors to proceed with the exploration of alternatives, including the possible sale of Keebler, and the Flowers Board authorized the further consideration of the related spin-off of Flowers’ bakery businesses to Flowers’ shareholders. The Keebler Board engaged Davis Polk & Wardwell to counsel it with respect to the exploration of strategic alternatives and a potential sale of Keebler. On that date, Flowers and Keebler jointly issued a press release announcing that each of their respective boards of directors had directed its management to explore strategic alternatives to maximize shareholder value. Flowers also announced that it had engaged Morgan Stanley and UBS Warburg as its financial advisors.

      On July 19, 2000 Keebler formally engaged Merrill Lynch as its financial advisor in connection with any proposed business combination involving Keebler.

      In the second half of July 2000, Flowers’ management, assisted by its financial and legal advisors, and in conjunction with Keebler, began to prepare for and to conduct an auction process for the sale of Flowers and Keebler, with the assumption that the proposed spin-off would be completed in connection with such a sale. At Flowers’ instruction, Flowers’ financial advisors contacted numerous potential bidders. Confidentiality agreements were sent to a number of these parties, and six confidentiality agreements were signed by prospective bidders over the following weeks. In particular, a confidentiality agreement was signed by Kellogg on July 24, 2000. After the confidentiality agreements were signed, informational packages were sent to potential bidders.

      By August 28, 2000, preliminary indications of interest were received from Kellogg and one other bidder. Those two parties, as well as an additional potential bidder who had not submitted a preliminary indication of interest, were invited to pursue further due diligence investigations, including presentations by Keebler management and more in-depth access to due diligence materials. The due diligence investigations for these three parties began in early September and continued for several weeks.

      During August and September, Flowers’ legal, financial and accounting advisors participated in due diligence, corporate structuring and tax and accounting analyses to refine a transaction structure in which, following the proposed spin-off of its bakery businesses, Flowers would consist primarily of its 54% stake in Keebler and a portion of its currently existing debt.

      Beginning on September 27, 2000, draft transaction agreements were sent to the three potential bidders, consisting of forms of merger agreements for the mergers of Flowers and Keebler into separate subsidiaries of a bidder, a voting agreement committing Flowers to vote its shares of Keebler stock in favor of a Keebler merger if the shareholders of Flowers approved a Flowers merger agreement and a distribution agreement relating to the spin-off. Flowers did not enter into negotiations with any of the three potential bidders at that time.

      During the week of October 9, 2000, Flowers’ financial advisors informed Kellogg that it should be prepared to submit its final bid on October 18, and that Kellogg would be informed of the actual deadline

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      On October 10, 2000, the Flowers Board held a brief meeting at which Flowers’ management reported on the status and prospects of the auction process. On October 12, 2000, separate meetings of the Flowers and Keebler Boards were held at which each Board was updated by its legal and financial advisors on the status of the auction and related matters. In addition, at its October 12 meeting, the Keebler Board formed a special committee, comprised of Melvin Stith, Wayne H. Pace and Johnston C. Adams, for the purpose of evaluating any transaction involving Keebler.

      On October 12, 2000, at a meeting of the Keebler special committee, the special committee appointed Melvin Stith as chairman and engaged Davis Polk & Wardwell as legal counsel to the Keebler special committee. At this meeting, Davis Polk & Wardwell advised the Keebler special committee on its legal duties and responsibilities in connection with the proposed transaction. The Keebler special committee also considered the selection of Merrill Lynch as financial advisor to the Keebler special committee but deferred a decision on the matter.

      During the week of October 16, informal updating conferences were held with the Flowers Board and the financial advisors continued their discussions with Kellogg and the other two potential bidders.

      On October 18, Kellogg submitted an offer to purchase all of the capital stock of Keebler. The offer reflected Kellogg’s acceptance of the spin-off and merger structure proposed by Flowers, stated that it was fully financed and provided a price of $41.00 per share in cash to the public stockholders of Keebler and a pricing formula for the Flowers’ shareholders which valued the Keebler shares owned by Flowers at the same $41.00 per share cash price. The pricing formula proposed by Kellogg reduced the aggregate consideration to be paid to all shareholders of Flowers (which was based on the 46,197,466 shares of Keebler stock owned by Flowers multiplied by $41.00 per share) by all indebtedness, liabilities, costs and expenses which would remain the responsibility of Flowers at the effective time of the Kellogg/ Flowers merger, as well as estimated tax on the gain to be recognized by Flowers as a result of the spin-off and all costs and expenses (including interest, prepayment penalties and premium) which would be incurred to retire any indebtedness retained by Flowers. At that time, Kellogg also proposed a form of voting agreement that required Flowers to agree to vote its shares of Keebler stock in favor of the Kellogg/ Keebler merger, whether or not the shareholders of Flowers approved and adopted the Flowers/ Kellogg merger and irrespective of whether the Kellogg/Flowers merger was completed. The Kellogg offer set a deadline of October 25 for entering into definitive agreements.

      On October 18, 2000, Flowers’ financial advisers informed the two other potential bidders that the deadline for submission of bids, including definitive forms of transaction agreements and evidence of any financing commitments, if financing was required, was October 20. On October 20, 2000, a written preliminary indication of interest was submitted by one of the two potential bidders. The indication was not a firm offer and referenced financial terms that were lower than those offered in Kellogg’s firm offer. In a telephone call to one of Flowers’ financial advisors, the potential bidder that submitted the preliminary indication then indicated that it was considering forming a strategic partnership for purposes of making a bid. Flowers’ financial advisers indicated that any such bid should be in compliance with the bid instructions previously given by the financial advisors and should be submitted as soon as possible.

      On Saturday, October 21, at a meeting of the Keebler special committee, the special committee formally engaged Merrill Lynch as financial advisor to the Keebler special committee and received an update from Merrill Lynch on the status of the auction and an overview of the terms of the Kellogg offer and the preliminary indication of interest received from one of the potential bidders. Also on October 21, Flowers’ financial advisors commenced discussions with representatives of Kellogg regarding the terms of the Kellogg proposal.

      On Sunday, October 22, the potential bidder that had submitted the preliminary indication of interest on October 20 delivered another written preliminary indication of interest to Flowers’ financial advisors which stated that the potential bidder was in the process of putting together a joint bid with the other

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      Also on October 22, Flowers’ Board met with its financial and legal advisors. Representatives of UBS Warburg and Morgan Stanley discussed the potential alternatives available to Flowers, details of the auction process, the Kellogg offer and the preliminary indications of interest received on October 22, and Jones Day advised the Flowers Board with respect to its legal duties in considering the results of the auction process and legal aspects of the Kellogg proposal and its strategic alternatives. After extensive questioning and discussion, the Flowers Board instructed Flowers’ management, along with Flowers’ financial and legal advisors, to proceed with negotiations with Kellogg for the acquisition of Keebler and Flowers, after it spun off its traditional bakery businesses, subject to final approval by the Flowers Board.

      On the same day, the Keebler special committee met with its financial and legal advisors to receive an update on the auction process and an overview of the terms of the Kellogg offer and the joint preliminary indication of interest received on October 22.

      During the afternoon and evening of Sunday, October 22 and the morning of Monday, October 23, Flowers’ financial advisors met with representatives of Kellogg to negotiate an improved bid. As a result of those negotiations, the Kellogg representatives stated that Kellogg would be prepared to increase its bid to $42.00 per share if the parties could come to agreement quickly on the other terms outlined in Kellogg’s October 18 proposal and if Flowers would commit to a period of exclusive negotiations with Kellogg. Further, Kellogg representatives advised Flowers that Kellogg would not be interested in pursuing a transaction unless definitive agreements could be reached by Thursday, October 26. After considering this proposal in light of the fact that no other firm offers had been submitted in the auction process, Flowers agreed to execute a letter to Kellogg committing not to negotiate with another party for the sale of itself or Keebler until Monday, October 30, and to report any unsolicited inquiry or proposal immediately to Kellogg. One contact from each of the two potential bidders was made and promptly reported to Kellogg, one on October 23 and one on October 24. No financial terms were proposed and no bid was ever submitted by either potential bidder after making those contacts.

      On Monday, October 23, the Keebler special committee met with its financial and legal advisors to receive a further update on the revised terms of the Kellogg offer, the status of the auction process and the joint preliminary indication of interest received on October 22.

      On Tuesday, October 24, Kellogg and Flowers continued negotiating the terms of the definitive agreements, with particular emphasis on the provisions relating to Flowers’ commitment to vote its shares of Keebler stock in favor of a Kellogg/ Keebler merger and the formula which would determine the amount of cash payable to each Flowers shareholder. Representatives and advisors of Keebler, the Keebler special committee and Kellogg were simultaneously negotiating the terms of the definitive agreement for the merger of Keebler and Kellogg. In addition, Sam K. Reed, president and chief executive officer of Keebler, met with Carlos Gutierrez, chairman and chief executive officer of Kellogg, for the purpose of discussing the terms of employment agreements to be offered to some members of Keebler’s management following the transaction, inasmuch as Kellogg was requiring that key executive officers of Keebler enter into employment agreements with Kellogg as a condition of Kellogg’s willingness to proceed with the transaction. The Flowers Board and the Keebler special committee each met and received updates from their financial and legal advisors during the day.

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      On Wednesday, October 25, negotiations continued among representatives of Flowers, the Keebler special committee and Kellogg, and their respective legal advisors on the terms of the transaction documents, and among the financial advisors on business and financial terms of the transaction. In particular, management and the legal advisors for the parties (including for the Keebler special committee) negotiated the final terms of the definitive agreements, including the provisions of the voting agreement, covenants, conditions to closing and termination fees. In addition, the law firm of Vedder, Price, Kaufman and Kammholtz, legal counsel to Keebler’s management, and representatives of Kellogg management negotiated the terms of the employment arrangements to be offered to some members of Keebler’s management in connection with the transaction.

      During the morning of October 25, 2000, the Keebler special committee received an update from its financial and legal advisors. During the evening of October 25, the Flowers Board again received a report from its advisors on the status of negotiations. Also during that evening, the Keebler special committee met in person with its financial and legal advisors. Davis Polk & Wardwell again advised the Keebler special committee on its legal duties and responsibilities and then made presentations regarding the structure of the transaction and the key terms and conditions of the Kellogg/Keebler merger agreement, the Kellogg/Flowers merger agreement, the voting agreement and the distribution agreement. Merrill Lynch then reviewed the auction process and the structure and key terms of the transaction from a financial point of view. Upon completion of this meeting, a meeting of the entire Keebler Board was held. At the Keebler Board meeting, Davis Polk & Wardwell and Merrill Lynch made presentations similar to those made at the prior Keebler special committee meeting and presentations were also made by the management of Keebler. In addition, presentations were made by UBS Warburg and Morgan Stanley on the conduct and results of the auction process. Following the Keebler Board meeting, the Keebler special committee again met with its legal and financial advisors to discuss the proposed transaction with Kellogg.

      Following the meetings of the Flowers and Keebler Boards and Keebler’s special committee, negotiations continued among representatives of Flowers, the Keebler special committee, Keebler and Kellogg, and their respective legal advisors, on the terms of the transaction documents, and among the financial advisors on the business and financial terms of the documents. During the evening of October 25 and early morning of October 26, the parties finalized the remaining financial terms. Agreement was reached on the pricing formula for Flowers’ merger agreement, including Kellogg’s agreement that the first $16 million of transaction-related expenses for which Flowers would be responsible would not reduce the consideration payable to the Flowers shareholders. The parties also agreed that Keebler would declare and pay a $16 million special cash dividend to its stockholders, including Flowers, immediately prior to the Kellogg/Keebler merger.

      On Thursday, October 26, the Flowers Board met to give final consideration to the transaction. Jones Day and Flowers’ general counsel, G. Anthony Campbell, made presentations regarding the terms and conditions of the Kellogg/Flowers merger agreement, the voting agreement, the distribution agreement and the Kellogg/ Keebler merger agreement. Each of UBS Warburg and Morgan Stanley delivered its oral opinion to the Flowers Board, each of which was confirmed in writing, that as of that date and based upon and subject to the matters in each opinion, the consideration to be received by Flowers’ shareholders in the Kellogg/Flowers merger is fair, from a financial point of view, to Flowers’ shareholders. By the unanimous vote of all directors present (one non-employee director was not available to participate), the Flowers Board then concluded that the Kellogg/Flowers merger agreement and the Kellogg/Flowers merger were fair to, and in the best interests of, Flowers’ shareholders and approved the Kellogg/Flowers merger agreement, the voting agreement and the distribution agreement and approved the other matters that were necessary to authorize the transaction with Kellogg.

      Later that morning after the Flowers Board met, the Keebler special committee met with its financial and legal advisors and received a similar update on the negotiations that had taken place since the prior special committee meeting and an oral opinion from Merrill Lynch, its financial advisor, that was later confirmed in writing, to the effect that, as of that date, subject to the assumptions and qualifications set forth in the opinion, the cash consideration to be received by Keebler’s stockholders pursuant to the Kellogg/Keebler merger is fair from a financial point of view to such stockholders, other than Flowers,

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      Definitive agreements were executed on the morning of October 26, and press releases announcing the transaction were issued by Kellogg and Flowers later that day.

Keebler’s Reasons for the Merger; Conclusion of the Keebler Special Committee and Recommendation of the Keebler Board

      Both the Keebler special committee and the Keebler Board, at separate meetings held on October 26, 2000, unanimously determined that the Kellogg/Keebler merger and the Kellogg/Keebler merger agreement are fair to and in the best interests of Keebler’s stockholders (other than Flowers with respect to the determination by the special committee). The Keebler Board has unanimously approved and adopted the merger and the merger agreement and the Flowers Board has approved the Flowers voting agreement, the Kellogg/Flowers merger agreement and the distribution agreement.

      In the course of determining that the Kellogg/Keebler merger and the Kellogg/Keebler merger agreement are fair to and in the best interest of Keebler’s stockholders (other than Flowers), the Keebler special committee consulted with Keebler’s management, as well as its financial and legal advisors and considered a number of factors in making its determination, including:

	(1)	the fact that Flowers, our controlling stockholder, determined that it was advantageous for Flowers to sell its stake in Keebler and that Keebler’s management believed that it was the appropriate time for a sale of Keebler to occur;
	(2)	the broad scope of the auction for Keebler conducted by Flowers and its financial and legal advisors, in conjunction with Keebler, which involved contacting all parties that were believed likely to have a potential interest and providing substantial due diligence information to prospective bidders;
	(3)	recent consolidation activity in the industry in which Keebler operates, such as the acquisition of Nabisco Holdings Corp. by Philip Morris Companies, Inc., the acquisition of Bestfoods by Unilever N.V. and the acquisition of International Home Foods, Inc. by ConAgra Foods, Inc.;
	(4)	the Keebler special committee’s familiarity with, and information provided by Keebler’s management, as to the business, financial condition, results of operations, current business strategy and future prospects of Keebler, the nature of the markets in which Keebler operates and Keebler’s position in such markets;
	(5)	the historical and current market prices for the Keebler common stock, including the information provided by Merrill Lynch, financial advisor to the Keebler special committee, as to Keebler’s strategic and other alternatives;
	(6)	the fact that the merger consideration of $42.00 in cash per Keebler share represented a premium of approximately 23% over the closing price of Keebler stock on July 17, 2000, the day prior to the announcement by Flowers and Keebler that strategic alternatives would be explored to maximize shareholder value and a premium of approximately 73% over the closing price of Keebler stock on March 13, 2000, the day that Nabisco Group Holdings adopted a

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		rights agreement in response to actions taken by Carl Icahn, which coincided with the commencement of trading price increases due to expectations of food industry consolidation;
	(7)	the Keebler special committee’s understanding, based on the negotiations between Flowers and Kellogg, that the merger consideration of $42.00 per share represented the highest price that Kellogg would be willing to pay in acquiring Keebler shares;
	(8)	the Keebler special committee’s belief that the preliminary indication of interest received from the other potential bidder — which was expressed in general terms, was subject to additional due diligence, negotiation of joint arrangements between the two potential bidders and approval of their respective boards of directors, and which did not provide confirmation that financing had been committed or contain suggested forms of definitive agreements as had been requested by Flowers’ financial advisors — was too uncertain and undefined to risk losing the specificity and greater certainty of the firm offer from Kellogg, which required that definitive agreements be entered into by October 26;
	(9)	the fact that the Keebler shares owned by Flowers were being valued, for purposes of the pricing formula in the Kellogg/Flowers merger agreement, at the same $42.00 price as the shares of Keebler owned by Keebler’s public stockholders;

	(10)	the opinion of Merrill Lynch that, as of October 26, 2000 and based upon and subject to the matters stated in the opinion, the cash consideration to be received pursuant to the merger by the stockholders of Keebler is fair from a financial point of view to such stockholders, other than Flowers, Kellogg and their respective affiliates;
	(11)	the fact that the merger agreement and the merger, as well as the related agreements, were the product of arm’s-length negotiations with Kellogg, and that no member of the special committee was employed by or affiliated with Keebler or Flowers, except as a director of Keebler;
	(12)	the fact that the merger agreement did not include a financing condition and the Keebler special committee’s conclusion, based on consultation with its financial advisor and information provided by Kellogg, that Kellogg could reasonably finance the consideration to be paid to Keebler’s stockholders in the Kellogg/Keebler merger and to Flowers shareholders in the Kellogg/Flowers merger;
	(13)	the lack of any required approval by Kellogg stockholders to complete the merger;
	(14)	the ability of Keebler and Kellogg to complete the merger if Flowers’ shareholder approval of the Kellogg/Flowers merger is not received by June 15, 2001, if the special meeting of Flowers shareholders held to vote on the Kellogg/Flowers merger (including any adjournment) concludes without approval of the Kellogg/Flowers merger from Flowers’ shareholders having been obtained, or if Flowers fails to perform or comply in any material respect with any obligation, agreement or covenant of Flowers to be performed or complied with under the Kellogg/Flowers merger agreement so that Kellogg’s conditions to consummation of the Kellogg/Flowers merger agreement cannot be satisfied;
	(15)	the conclusion that the terms and conditions of the Kellogg/Flowers merger agreement and voting agreement were reasonable and necessary to accomplish the transaction with Kellogg;
	(16)	the fact that the merger agreement is required to be submitted to Keebler stockholders even if the Keebler Board withdraws or changes its recommendation and the fact that, because Flowers is required to vote all of its Keebler shares in favor of the merger agreement, Keebler stockholder approval of the merger is assured; and that this would likely discourage other potentially interested third parties, if any, from proposing an alternative or superior transaction to Keebler and prevent Keebler from engaging in any such transaction if proposed; and

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	(17)	the recognition that, following consummation of the merger, the current stockholders of Keebler will no longer be able to participate in any increases or decreases in the value of Keebler’s businesses and properties.

      In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Keebler special committee did not find it useful to and did not attempt to quantify, rank or otherwise assign relative weights to the factors considered in connection with its determination. The Keebler special committee relied on the experience and expertise of Merrill Lynch, its financial advisor, for quantitative analysis of the financial terms of the merger, as described under “Opinion of Financial Advisor.” In addition, the Keebler special committee did not undertake to make any specific determination as to whether any particular factor was essential to its ultimate determination, but rather the special committee conducted an overall analysis of the factors described above, including thorough discussions with and questioning of Keebler’s management and the Keebler special committee’s legal and financial advisors. In considering the factors described above, individual members of the Keebler special committee may have given different weight to different factors.

      The Keebler Board consists of ten members, three of whom served on the Keebler special committee. At the October 26 meeting of the Keebler Board, the Keebler special committee, with the participation of representatives of its legal and financial advisors, Davis Polk & Wardwell and Merrill Lynch, respectively, reported to the entire Keebler Board on its review of the merger agreement and the merger. The Keebler Board considered the conclusions and recommendations of the Keebler special committee. Furthermore, the Keebler Board considered the fact that the Keebler special committee received a fairness opinion from Merrill Lynch together with the other factors enumerated above which were considered by the special committee. The Keebler Board believes that these factors support its fairness determination.

      In addition, the Keebler special committee believes that sufficient procedural safeguards were and are present to ensure the fairness of the merger to Keebler stockholders (other than Flowers) and to permit the Keebler special committee to represent effectively the interests of Keebler stockholders (other than Flowers) including:

	•	the Keebler special committee consisted entirely of non-employee independent directors who acted to represent solely the interests of the Keebler stockholders other than Flowers;
	•	the Keebler special committee retained and received advice from its independent legal counsel, Davis Polk & Wardwell;
	•	the Keebler special committee was advised by and received the opinion of its financial advisor, Merrill Lynch; and
	•	the availability of appraisal rights under Delaware law for Keebler stockholders, which rights are described under “Appraisal Rights.”

Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated

      On July 19, 2000, Keebler retained Merrill Lynch to act as its financial advisor with respect to a possible business combination involving Keebler. On October 17, 2000, following the formation of the Keebler special committee, the engagement was amended to provide that Merrill Lynch would act only as the financial advisor to the Keebler special committee. As part of the engagement, the Keebler special committee requested that Merrill Lynch consider whether the cash consideration to be received by Keebler’s stockholders pursuant to the merger was fair from a financial point of view to such stockholders, other than Flowers, Kellogg and their respective affiliates. The Keebler special committee retained Merrill Lynch to act as its financial advisor in connection with the merger because Merrill Lynch is a leading investment banking and financial advisory firm with experience in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of securities, private placements and valuations for corporate purposes. Merrill Lynch has in the past performed investment advisory and/or corporate finance services for Keebler.

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      At a meeting of the Keebler special committee on October 26, 2000, Merrill Lynch rendered its oral opinion to the Keebler special committee, subsequently confirmed in writing as of October 26, 2000, on which opinion all directors of the Keebler Board are permitted to rely, to the effect that, as of that date and based upon the assumptions made, matters considered and limits of their review, as set forth in their opinion, the cash consideration to be received by Keebler’s stockholders pursuant to the merger is fair from a financial point of view to such holders, other than Flowers, Kellogg and their respective affiliates.

      THE FULL TEXT OF MERRILL LYNCH’S OPINION, WHICH SETS FORTH MATERIAL INFORMATION RELATING TO MERRILL LYNCH’S OPINION THAT THE CASH CONSIDERATION TO BE RECEIVED BY KEEBLER’S STOCKHOLDERS PURSUANT TO THE MERGER WAS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH STOCKHOLDERS, OTHER THAN FLOWERS, KELLOGG AND THEIR RESPECTIVE AFFILIATES, INCLUDING THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX C TO THIS INFORMATION STATEMENT AND IS INCORPORATED BY REFERENCE. THIS DESCRIPTION OF MERRILL LYNCH’S OPINION SHOULD BE REVIEWED TOGETHER WITH THE FULL TEXT OF THE OPINION, AND YOU ARE URGED TO READ THE OPINION AND CONSIDER IT CAREFULLY. THE FOLLOWING SUMMARY OF MERRILL LYNCH’S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.

      Merrill Lynch’s opinion is addressed to the Keebler special committee (and all directors of the Keebler Board are permitted to rely on Merrill Lynch’s opinion) and evaluated only the fairness, from a financial point of view, of the cash consideration to be received by Keebler’s stockholders pursuant to the merger to such stockholders, other than Flowers, Kellogg and their respective affiliates. The terms of the merger, including the merger consideration, were determined through negotiations between Flowers, Kellogg, Keebler and the Keebler special committee, and were not determined by Merrill Lynch. Merrill Lynch’s opinion does not address the merits of the underlying decision to engage in the merger and does not constitute, nor should it be construed as, a recommendation to any stockholder as to how to vote on the merger or any matter related to the merger.

      In arriving at its opinion, Merrill Lynch, among other things:

	•	reviewed certain publicly available business and financial information relating to Keebler that Merrill Lynch deemed to be relevant;
	•	reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of Keebler;
	•	conducted discussions with members of senior management of Keebler concerning the matters described in the two clauses above;
	•	reviewed the market prices and valuation multiples for the Keebler shares and compared them with those of certain publicly traded companies that Merrill Lynch deemed to be relevant;
	•	reviewed the results of operations of Keebler and compared them with those of certain publicly traded companies that Merrill Lynch deemed to be relevant;
	•	compared the proposed financial terms of the merger with the financial terms of certain other transactions that Merrill Lynch deemed to be relevant;
	•	participated in certain limited discussions among representatives of Keebler, Flowers, and Kellogg and their respective legal and financial advisors;
	•	reviewed a draft dated as of October 26, 2000 of the merger agreement between Kellogg and Keebler; a draft dated as of October 26, 2000 of the merger agreement between Kellogg and Flowers; a draft dated as of October 26, 2000 of the distribution agreement between Flowers and

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		Flowers Foods; and a draft dated as of October 26, 2000 of a voting agreement to be entered into between Flowers and Kellogg; and
	•	reviewed such other financial studies and analysis and took into account such other matters Merrill Lynch deemed necessary, including Merrill Lynch’s assessment of general economic, market and monetary conditions.

      In preparing its opinion, Merrill Lynch has assumed and relied on the accuracy and completeness of all information supplied or otherwise made available, discussed with or reviewed by or for Merrill Lynch, or publicly available, and Merrill Lynch has not assumed any responsibility for independently verifying such information or undertaken an independent evaluation or appraisal of any of the assets or liabilities of Keebler or been furnished with any such evaluation or appraisal. In addition, Merrill Lynch has not assumed any obligation to conduct, nor has Merrill Lynch conducted, any physical inspection of the properties or facilities of Keebler. With respect to the financial forecast information furnished to or discussed with Merrill Lynch by Keebler, Merrill Lynch has assumed that they have been reasonably prepared and reflect the best currently available estimates and judgement of the Keebler’s management as to the expected future financial performance of Keebler. Merrill Lynch has assumed that Flowers, and its subsidiaries (other than Keebler), do not have any material liabilities after giving effect to the distribution, but prior to the consummation of the merger between Flowers and Kellogg, other than that which has been disclosed to Merrill Lynch. Finally, Merrill Lynch assumed that the final form of the merger agreements, distribution agreement and voting agreement are substantially similar to the last drafts reviewed by them. Merrill Lynch subsequently confirmed that the differences between the executed agreements and the drafts reviewed by them at the time it rendered its opinion would not have changed its opinion.

      Merrill Lynch’s opinion was necessarily based upon market, economic and other conditions as they exist and can be evaluated on, and on the information made available to Merrill Lynch as of October 26, 2000, the date of the opinion.

      Morgan Stanley & Co. Incorporated and UBS Warburg LLC were responsible for the bidding process with respect to the acquisition of Keebler. Merrill Lynch was not involved in and did not participate in the bidding process for Keebler or its design or implementation. Merrill Lynch has, however, reviewed with Morgan Stanley & Co. Incorporated and UBS Warburg LLC their process of soliciting indications of interest and bids, including the identity of the third parties contacted and the indications of interest and bids submitted as well as the discussions held between Morgan Stanley & Co. Incorporated and UBS Warburg LLC and those parties. Merrill Lynch was not authorized by Keebler, its Board of Directors, or the special committee of the Board of Directors of Keebler, to solicit, nor did Merrill Lynch solicit, third-party indications of interest for the acquisition of all or any part of Keebler.

      In accordance with customary investment banking practice, Merrill Lynch employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial and comparative analyses utilized by Merrill Lynch in arriving at its opinion.

      Historical Trading Performance:  Merrill Lynch reviewed the historical trading averages for Keebler common stock from their initial public offering on January 29, 1998 to July 17, 2000, the day immediately

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      Selected Comparable Publicly Traded Companies Analysis: Merrill Lynch compared certain financial and operating ratios for Keebler with the corresponding financial and operating ratios for a group of publicly traded companies engaged primarily in the food industry that Merrill Lynch deemed to be comparable to Keebler. For the purpose of its analyses, the following companies in the food industry were used as companies comparable to Keebler:

	•	Campbell Soup Co.
	•	General Mills
	•	H.J. Heinz Co.
	•	Kellogg Co.
	•	Quaker Oats Co.
	•	Danone Groupe
	•	Nestle
	•	Unilever

      For each of the comparable companies, Merrill Lynch calculated stock price as a multiple of estimated earnings per share for the calendar years ended 2000 and 2001. This analysis resulted in the following relevant ranges for the comparable companies:

Based on the foregoing, Merrill Lynch determined a reference range for an implied value per share of $27.00 to $41.50.

      Merrill Lynch also calculated the market capitalization value of each of the public comparables as a multiple of the latest twelve months earnings before interest, taxes, depreciation and amortization, commonly referred to as EBITDA, and as a multiple of the latest twelve months earnings before interest

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Based on the foregoing, Merrill Lynch determined a reference range of an implied value per share of $34.75 to $41.75.

      To calculate the trading multiples utilized in the analysis of selected comparable publicly traded companies, Merrill Lynch used publicly available information concerning the historical and projected financial performance of the comparable companies, including public historical financial information and consensus analysts’ earnings estimates.

      None of the comparable companies is, of course, identical to Keebler. Accordingly, a complete analysis of the results of the foregoing calculations cannot be limited to a quantitative review of such results and involves complex considerations and judgments concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading volume of the comparable companies, as well as that of Keebler.

      Selected Comparable Transactions Analysis. Using publicly available information, Merrill Lynch considered selected transactions in the food industry that Merrill Lynch deemed to be relevant. Specifically, Merrill Lynch reviewed the following transactions which it deemed to be comparable:

	•	Cadbury Schweppes PLC’s acquisition of Snapple Beverage Group, Inc. in September 2000;
	•	Pillsbury Co.’s merger with General Mills Inc. in July 2000;
	•	Nabisco Holdings Corp.’s merger with Philip Morris Cos Inc. in June 2000;
	•	Bestfoods’ merger with Unilever PLC in June 2000;
	•	International Home Foods Inc.’s merger with ConAgra Inc. in June 2000;
	•	Unilever NV’s acquisition of Slim-Fast Foods Co. in April 2000;
	•	United Biscuits PLC’s merger with Finalrealm in February 2000;
	•	McKesson Water Products Co.’s merger with Danone Group in January 2000;
	•	Procter & Gamble Co.’s acquisition of IAMS Co. in August 1999;
	•	Tropicana Products, Inc.’s merger with PepsiCo, Inc. in July 1998;
	•	Pet Inc.’s merger with Grand Metropolitan PLC in January 1995;
	•	Gerber Products Co.’s merger with Sandoz Ltd. in May 1994;
	•	Campbell Soup Co.’s acquisition of Pace Food in November 1994;
	•	Borden Inc.’s merger with Kohlberg Kravis Roberts & Co. in September 1994;
	•	Snapple Beverage Corp.’s merger with Quaker Oats Co. in November, 1994;
	•	Campbell Soup Co.’s acquisition of Arnotts Biscuits Ltd. in October 1992;
	•	Philip Morris Inc.’s acquisition of Freia Marabou A.S. in September 1992;

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	•	Philip Morris Inc.’s acquisition of Jacobs Suchard AG in June 1990;
	•	Kraft Inc.’s merger with Philip Morris, Inc. in October 1988;
	•	Pillsbury Co.’s merger with Grand Metropolitan PLC in October 1988; and
	•	RJR Nabisco Inc.’s merger with Kohlberg Kravis Roberts & Co. in December, 1988;

      Using publicly available information concerning historical financial performance, Merrill Lynch calculated the transaction values for comparable transactions as a multiple of EBITDA and EBIT of the target companies for the last twelve months immediately preceding the announcement of each of the respective transactions. This analysis resulted in the following relevant ranges:

Based on the foregoing, Merrill Lynch determined a reference range for an implied value per share of $39.50 to $55.50.

      No company utilized in the selected comparable transaction analysis is identical to Keebler nor is any transaction identical to the contemplated transaction between Keebler and Kellogg. An analysis of the results therefore requires complex considerations and judgments regarding the financial and operating characteristics of Keebler and the companies involved in the comparable transactions, as well as other facts that could affect their publicly-traded and/or transaction values. The numerical results are not in themselves meaningful in analyzing the contemplated transaction as compared to comparable transactions.

Discounted Cash Flow Analysis:  Merrill Lynch performed a discounted cash flow analyses (i.e., analyses of the present value of the projected unlevered after-tax cash flows) for Keebler the fiscal years ended 2001 through 2005, inclusive, using discount rates (determined through the use of the capital asset pricing model) ranging from 9.0% to 11.0% and terminal value multiples of year 2005 EBITDA ranging from 9.0x to 10.5x, based on projections supplied by Keebler. Merrill Lynch arrived at the following results:

Based upon the foregoing, Merrill Lynch determined a reference range for an implied value per share of $40.25 to $51.00.

      A discounted cash flow analysis assuming perpetual growth rate of 3-4% instead of a termination EBITDA multiple was also calculated using discount rates ranging from 9.0% to 11.0%. The following table sets forth the results:

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Based upon the foregoing, Merrill Lynch determined a reference range for an implied value per share of $29.75 to $50.00.

      Miscellaneous:  Merrill Lynch also calculated a number of ratios with respect to the proposed merger. The following table sets forth Merrill Lynch’s results:

      The summary set forth above does not purport to be a complete description of the analyses presented by Merrill Lynch. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Merrill Lynch believes that selecting any portion of its analyses or of the summary set forth above, without considering the analyses as a whole, would create an incomplete view of the process underlying Merrill Lynch’s opinion. In arriving at its opinion, Merrill Lynch considered the results of all its analyses. The analyses performed by Merrill Lynch are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those suggested by Merrill Lynch’s analyses. The analyses do not purport to be appraisals or to reflect the prices at which Keebler might actually be sold or the prices at which Keebler common stock may trade at any time in the future. The analyses were prepared solely for the purposes of Merrill Lynch providing its opinion to the special committee as to the fairness, from a financial point of view, of the cash consideration to be received pursuant to the merger by Keebler’s stockholders to such stockholders, other than Flowers, Kellogg, or their respective subsidiaries. Analyses based upon forecasts or future results are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by Merrill Lynch’s analyses. Because the analyses are inherently subject to uncertainty, being based upon numerous factors and events, including, without limitation, factors related to general economic and competitive conditions beyond the control of the parties or their respective advisors, none of Merrill Lynch, Keebler, Kellogg, Flowers, or any other person assumes responsibility if future results or actual values are materially different from those forecast. The foregoing summary does not purport to be a complete description of the analyses performed by Merrill Lynch and is qualified by reference to the written opinion dated as of October 26, 2000 of Merrill Lynch, which is attached as Annex C to this information statement.

Fee Arrangements

      Under the terms of the engagement letter dated July 19, 2000, and amended October 17, 2000, Keebler will pay Merrill Lynch a retainer fee of $250,000 and will pay an additional fee of $5,000,000 to Merrill Lynch for its services contingent upon the closing of the merger, from which the retainer fee of $250,000 will be deducted. In addition to any fees payable to Merrill Lynch under the engagement letter, Keebler has agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses incurred in connection with providing its services and rendering its opinion, including, without limitation, the reasonable fees of its legal counsel. Keebler has also agreed to indemnify Merrill Lynch, its affiliates and each of their respective directors, officers, agents, employees and controlling persons against liabilities, including liabilities under U.S. federal securities laws, related to or arising out of the merger or the engagement of Merrill Lynch, other than any such liabilities resulting from Merrill Lynch’s bad faith or gross negligence.

      Merrill Lynch has in the past provided financial advisory and financing services to Keebler and may continue to do so and may receive fees for the rendering of such services. In addition, in the ordinary course of its business, Merrill Lynch may actively trade shares of Keebler, Flowers, or Kellogg and other securities of Keebler, Flowers, or Kellogg for its own account or for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities.

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      The following is a summary of the material terms of the merger agreement and is qualified by reference to the complete text of the merger agreement, which is incorporated by reference and attached as Annex A to this information statement.

Completion of the Merger

      As soon as practicable after all of the conditions set forth in the merger agreement have been satisfied or waived, the parties will file a certificate of merger with the Secretary of State of the State of Delaware. The merger will be completed at the time the certificate is filed or, if later, at the time specified in the certificate.

Merger Consideration

      The merger agreement provides that each share of Keebler common stock outstanding immediately prior to the completion of the merger (other than shares held by Flowers (except under the circumstances described below where the Kellogg/ Flowers merger is not completed) or as to which appraisal rights have been properly exercised), will, at the completion of the merger, be converted into the right to receive $42.00 per share in cash, without interest. However, shares of Keebler held as treasury shares or owned by Kellogg or its subsidiaries will remain outstanding without any payment for those shares. Under the circumstances described below under “—Conditions to the Merger—Closing Conditions for Each Party” in which the Kellogg/ Keebler merger is consummated but the Kellogg/ Flowers merger is not, all outstanding shares of Keebler stock, including those owned by Flowers but excluding shares as to which appraisal rights have been properly exercised, would be converted into $42.00 per share in cash.

Surrender of Certificates and Payment Procedures

      An exchange agent will be appointed to handle the exchange of your share certificates for the merger consideration. Promptly after the merger, either Kellogg or the exchange agent will send you a letter of transmittal and instructions explaining how to surrender your share certificates. If you surrender your certificates to the exchange agent, together with a properly completed letter of transmittal, and all other documents the exchange agent may reasonably require, you will receive the appropriate merger consideration. Until surrendered in accordance with the foregoing instructions, each certificate formerly representing shares of Keebler, other than shares as to which appraisal rights have been properly exercised and other than shares held by Flowers except under the circumstances described below where the Kellogg/ Flowers merger is not completed, will only represent the right to receive the merger consideration. No interest will be paid or will accrue on the merger consideration payable.

      At the completion of the merger, the stock transfer book of Keebler will be closed and there will be no further registration of transfers of shares. If certificates of shares are presented after the completion of the merger, they will be canceled and exchanged for the right to receive the merger consideration.

Stock Options

      At or immediately prior to the completion of the merger, each option, whether or not vested or exercisable, will be canceled, and Keebler will pay each option holder an amount in cash per option determined by multiplying (1) the excess, if any, of $42.00 over the applicable exercise price of such option by (2) the number of shares to which such option relates (assuming full vesting of all outstanding options).

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Covenants

      Keebler and Kellogg have agreed to certain covenants in the merger agreement. A description of the covenants follows:

  No Solicitation By Keebler

      Keebler has agreed that it will not, and will not authorize or permit any of its subsidiaries, or their respective directors, officers, employees, investment bankers, attorneys, accountants or other advisors or representatives to directly or indirectly:

	•	solicit, initiate, negotiate or encourage, or take any other action knowingly to facilitate any inquiry, proposal or offer relating to or that could be reasonably likely to lead to a takeover proposal (which, for these purposes, involves the direct or indirect acquisition of assets or businesses constituting 20% or more of Keebler’s consolidated revenues, operating income or assets, or of 20% or more of Keebler’s common stock or the capital stock of Keebler’s subsidiaries directly or indirectly holding such assets or businesses) other than a takeover proposal made by Kellogg; or
	•	enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish any person any information relating to, or otherwise cooperate with, any takeover proposal (other than a takeover proposal made by Kellogg); Keebler has also agreed to immediately cease any existing activities, discussions and negotiations with any third party conducted prior to entering into the merger agreement with respect to any takeover proposal, and request the return of all confidential information we may have provided to such third party regarding Keebler.

      However, we may comply with Rule 14e-2(a) of the Securities Exchange Act of 1934, as amended, with regard to a takeover proposal, and we may make any disclosure to our shareholders if our outside legal counsel advises us that the failure to make that disclosure would be inconsistent with applicable law, but the Keebler Board may not take any action that is inconsistent with the following. The Keebler Board may, prior to receipt of Flowers’ written consent approving the merger:

	•	furnish information about us or our subsidiaries to the person making the takeover proposal if we enter into a confidentiality agreement with that person with terms no more favorable to that person than those of the confidentiality agreement Flowers signed with Kellogg, provided that any information given to that third party has previously been, or is given, at the same time, to Kellogg; and
	•	participate in discussions or negotiations with the person making the takeover proposal if we have given Kellogg prior written notice of our intent to do so,

only in response to an unsolicited bona fide written takeover proposal that did not otherwise result from a breach of the Keebler Board’s obligations with respect to takeover proposals described above and that the Keebler Board reasonably determines in its reasonable good faith judgment, after consulting with our financial advisors, constitutes a superior proposal (that is, an unsolicited, bona fide and binding written offer from a third party that, if consummated, would result in such third party or its shareholders acquiring, directly or indirectly, more than 50% of our voting power or substantially all of our consolidated assets for consideration that the Keebler Board determines in its reasonable good faith judgment, after consultation with a nationally reputed financial advisor, to be superior from a financial point of view to our shareholders, taking into account also any changes Kellogg may propose to the merger agreement in response to such proposal or otherwise).

  Keebler Board’s Covenant to Recommend

      The Keebler Board has agreed it will not:

	•	withdraw or modify in any way adverse to Kellogg or its acquisition subsidiary, or propose publicly to do either of these, its recommendation or declaration of advisability of the merger agreement or the merger, although, prior to receiving Flowers’ written consent approving our merger, the Keebler

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		Board may effect such an adverse recommendation change if it receives an unsolicited superior proposal (that was not in breach of the Keebler Board’s obligations with respect to takeover proposals described above) and believes in good faith after receipt of advice from its outside legal counsel that such action is required by Delaware law to avoid a breach of its fiduciary duties;
	•	adopt or approve a takeover proposal, or recommend or publicly propose to do so, or withdraw or publicly propose to withdraw its approval of the merger;
	•	cause or permit us to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition, merger, option, joint venture or partnership or other agreement related to, which is intended to or reasonably likely to lead to a takeover proposal, other than a confidentiality agreement with a third party described above; or
	•	agree or resolve to agree to take any of these actions.

      We have also agreed that we will not make an adverse recommendation change before five business days after receipt by Kellogg of our written notice that the Keebler Board has received a superior proposal. This notice will include the terms and conditions of the superior proposal and the name of the person making the superior proposal, and will be repeated for any material amendment. Further, we agreed that if there is an adverse recommendation change, it will not change the approval by the Keebler Board of this transaction under Delaware law or for the purpose of making any state laws or takeover statutes inapplicable to the transaction, including the merger. Even if the Keebler Board makes an adverse recommendation change, Flowers has agreed to deliver its written consent approving the merger.

      Additionally, we have agreed to promptly advise Kellogg:

	•	of any request for information that we reasonably believe could lead to, or contemplates, a takeover proposal;
	•	of any takeover proposal we receive, along with a copy of that proposal; or
	•	any inquiry we receive which we reasonably believe could lead to a takeover proposal.

  Special Dividend

      Immediately prior to the effective time of the merger, Keebler will declare a special cash dividend in the aggregate amount of $16 million, which is to be paid pro rata to all Keebler stockholders, including Flowers. This special dividend will be in addition to any regular dividends declared and paid as permitted under the merger agreement.

  Mutual Covenants

      Keebler and Kellogg have agreed:

	•	to use their reasonable efforts to take all actions necessary, proper or advisable under applicable laws and regulations to complete the transactions contemplated by the merger agreement. In particular, Keebler and Kellogg have agreed to make an appropriate filing pursuant to the HSR Act, and to each use its reasonable efforts to cause the expiration or termination of the applicable waiting periods under the HSR Act (and to obtain the necessary approvals under any foreign laws, rules or regulations) as soon as reasonably practicable; however, Kellogg is not required to, and Keebler will not, without Kellogg’s consent, waive any rights or accept any limitation on its operations or dispose of any of its assets as a result of any such filings. If Kellogg so requests, we will agree to any of these waivers, limitations or disposals, conditioned on the merger agreement becoming effective;
	•	to promptly notify each other of any communication from a governmental entity and, subject to applicable law, permit the other party to review in advance any proposed written communications to any governmental entity;

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	•	not to agree to participate in any substantive meetings or discussions with a governmental entity relating to this transaction unless the other party has been consulted with in advance and, to the extent permitted by the governmental authority, given the opportunity to participate in, and attend, the meetings or discussions;
	•	to provide to each others’ counsel, subject to applicable confidentiality procedures, copies of all correspondence, filings and communications between them and a governmental entity;
	•	that, in connection with obtaining financing for the transactions contemplated by the merger agreement:

	•	we will, if reasonably requested by Kellogg, enter into such agreements, use our reasonable best efforts to deliver such certificates or opinions as are customary in a financing, and pledge, grant a security interest in, or grant liens on, our assets, pursuant to such agreements, provided that any such pledge, security interest or lien will not be effective until the merger is effective,
	•	any liabilities or expenses we reasonably incur in doing any of these will be the responsibility of Kellogg and any of our obligations under this provision of the merger agreement will be terminated with no liability to us if the merger agreement is terminated in accordance with its terms;
	•	with reasonable assurance of confidentiality, we will furnish any lenders specified by Kellogg, financial or other information in our possession relating to us, this merger or the entire transaction, and
	•	we will make our senior officers and financial and accounting personnel available to assist, and otherwise cooperate with any lender;

	•	to cooperate and use our reasonable best efforts to prepare this information statement, to determine whether any actions are required to be taken with respect to any other governmental entity or any consents, waivers or approvals are required to be obtained from parties to any contracts in connection with the consummation of the transactions contemplated by the merger agreement, and in taking any of these actions and obtaining any required consents, waivers or approvals;
	•	to consult with each other prior to issuing any press release or making any public statement related to the merger agreement;
	•	that at and after the effective time of the merger, the officers and directors of the surviving corporation will be authorized to execute and deliver any deeds, bills of sale, assignments or assurances, and to take and do any and all actions on behalf of Keebler or Kellogg’s acquisition subsidiary to vest, perfect or confirm in the surviving corporation any and all right, title and interest in any rights, properties or assets of Keebler acquired or to be acquired by the surviving corporation as a result of the merger; and
	•	to notify each other of:

	•	any notice or other communication from any person alleging that the person’s consent is required in connection with the transactions contemplated by the merger agreement,
	•	any communication from any governmental entity relating to the transactions contemplated by the merger agreement, or
	•	any action, suit, claim, investigation or proceeding commenced or threatened against or relating to any of the parties to the merger agreement or any of their respective subsidiaries in connection with the related transactions.

Keebler’s Interim Operations

      Keebler has agreed that until the completion of the merger, Keebler and its subsidiaries will conduct their business and operate their properties in the ordinary course consistent with past practice and will use

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	•	declare or pay any dividends or other distribution on its capital stock other than the special dividend described above and quarterly dividends not to exceed $0.1125 per share on customary record and payment dates;
	•	repurchase, redeem or otherwise acquire or offer to acquire shares or other securities of Keebler or any of its subsidiaries;
	•	issue, deliver, pledge, encumber or sell any shares of Keebler, or any securities convertible into shares, or any rights, warrants or options to acquire any shares, other than issuances of shares pursuant to stock-based awards or options that are outstanding on the date of the merger agreement;
	•	amend its certificate of incorporation or by-laws or the terms of any outstanding securities of Keebler or its subsidiaries;
	•	merge or consolidate with, invest in or acquire the stock or assets of any entity, other than pursuant to existing disclosed commitments, ordinary course of business consistent with past practices purchases of manufacturing materials and services or planned capital expenditures (not to exceed $100 million in the aggregate in 2000 and $90 million in the aggregate in 2001);
	•	sell, lease, license, mortgage or otherwise dispose of any subsidiary or assets, other than pursuant to existing disclosed commitments or sales of inventory and equipment in the ordinary course of business consistent with past practices;
	•	incur or guarantee indebtedness for borrowed money or other debt securities other than borrowings under Keebler’s revolving credit agreement in the ordinary course of business and in amounts consistent with past practices;
	•	except as required under collective bargaining agreements in effect as of the date of the merger agreement, by applicable law or as may be mutually agreed to by the parties, adopt or amend any existing employee benefits or compensation arrangement which would materially increase the costs or obligations of Keebler or any of its subsidiaries;
	•	except to the extent required under any collective bargaining agreements in effect as of the date of the merger agreement, by applicable law or existing disclosed employment agreements, increase the compensation of or pay any benefits to officers, directors or employees except in the ordinary course of business for employees who are not officers, directors or holders of options;
	•	renew or enter into any material collective bargaining agreement or renew or enter into any collective bargaining agreements which would materially increase the costs or obligations of Keebler;
	•	contribute to any trust or employee arrangement, except as required under existing agreements or by law;
	•	adopt a plan of liquidation, dissolution, merger, consolidation, restructuring, recapitalization or reorganization, or enter into any agreement providing for acceleration of any material payment or performance as a result of a change in control;
	•	enter into or renew any noncompete or exclusivity agreement, other than with respect to any exclusivity or similar agreements regarding the sale of specialty products in the ordinary course of business consistent with past practices;
	•	renew, enter into, amend or waive any material right under any contract with or loan to any affiliate (other than wholly-owned subsidiaries) of Keebler;

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	•	create or incur any lien on any asset (other than Keebler intellectual property rights) which could materially detract from the value of the property or interfere with its use;
	•	make any loan, advance or capital contribution to or investment in any person not wholly owned by Keebler, other than immaterial amounts in the ordinary course consistent with past practices;
	•	enter into, amend or terminate any SEC-filed contract or any agreement having an aggregate value greater than $10 million;
	•	sell, license or lease or otherwise dispose of, or create or incur any lien on, any intellectual property rights, brand or line of business, other than pursuant to existing disclosed agreements other than in the ordinary course of business consistent with past practices in connection with the sale of products from Keebler;
	•	settle or compromise any material litigation for an amount in excess of the established reserves or waive, release or assign any material claim;
	•	materially change its accounting policies, procedures or practices, other than as required by the SEC or by GAAP;
	•	except as otherwise required by law, make any material tax election, settle or compromise any material tax claim, file any tax return (other than in a manner consistent with past practice) or change any method of tax accounting; or
	•	agree or commit to do any of the foregoing.

Indemnification and Insurance of Keebler Directors and Officers

      Kellogg has agreed that it will cause Keebler, for six years after the merger:

	•	to indemnify, including the advancement of expenses, Keebler’s present and former officers and directors in respect of acts or omissions occurring prior to the completion of the merger, to the fullest extent permitted by applicable laws or provided under Keebler’s charter and bylaws; and
	•	to use its reasonable efforts to provide those officers and directors with officers’ and directors’ liability insurance in respect of acts or omissions occurring prior to the completion of the merger on terms with respect to coverage and amount no less favorable than the existing policy, provided that neither Kellogg nor the surviving corporation will be required to pay an aggregate annual premium in excess of 200% of the current rate paid by Keebler.

Employee Matters

      In connection with the merger, Kellogg has agreed to honor, and to cause the surviving corporation to honor, certain change-of-control provisions with respect to:

	•	the 2000 Keebler Incentive Plan, to the extent triggered by the transactions contemplated by the merger agreement;
	•	the Company’s Revised Policy Regarding Termination Benefits for Certain Executives in the Event of a Change of Control with respect to the change of control resulting from the transactions contemplated by the merger agreement; and
	•	the Company’s Change of Control Severance Policy as it applies to non-officers and non-union employees with respect to the change of control resulting from the transactions contemplated by the merger agreement.

      In addition, the surviving corporation has agreed to give Keebler employees full credit for purposes of eligibility, early retirement and vesting under any employee benefit plan maintained by it or Kellogg for their respective subsidiaries for service with Keebler prior to the merger. With respect to welfare benefit plans, Kellogg also agreed to, and to cause the surviving corporation to, waive any pre-existing condition

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Representations and Warranties

      Keebler has made certain customary representations and warranties to Kellogg, including as to:

	•	corporate existence and power;
	•	corporate authorization;
	•	governmental authorization;
	•	non-contravention;
	•	capitalization;
	•	subsidiaries;
	•	SEC filings;
	•	financial statements;
	•	disclosure documents;
	•	absence of certain changes;
	•	undisclosed material liabilities;
	•	compliance with laws and court orders;
	•	litigation;
	•	finders’ fees;
	•	opinion of financial advisors;
	•	tax matters;
	•	employee benefit plans;
	•	environmental matters;
	•	intellectual property;
	•	material contracts and joint ventures;
	•	insurance;
	•	indebtedness;
	•	real property;
	•	transactions with affiliates;
	•	customers; and
	•	anti-takeover statute.

      Kellogg has made certain customary representations and warranties to Keebler, including as to:

	•	corporate existence and power;
	•	corporate authorization;
	•	governmental authorization;

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	•	non-contravention;
	•	disclosure documents;
	•	finders’ fees; and
	•	adequate funds.

      The representations and warranties contained in the merger agreement do not survive the completion of the merger or the termination of the merger agreement.

Conditions to the Merger

  Closing Conditions for Each Party

      The obligations of Keebler and Kellogg to complete the merger are subject to the satisfaction or waiver of the following conditions:

	•	approval and adoption of the merger agreement by Keebler’s stockholders;
	•	no federal, state or foreign statute, rule, regulation, executive order, decree or injunction makes illegal or otherwise prohibits consummation of the merger or the transactions contemplated by the merger agreement;
	•	expiration or termination of the applicable waiting periods under the HSR Act or any applicable foreign competition law or regulation;
	•	consummation of the Flowers merger; provided, however, that this condition is deemed satisfied if Flowers’ shareholder approval of the Kellogg/Flowers merger is not received by June 15, 2001; if the Flowers shareholder meeting held to vote on the Kellogg/Flowers merger (including any adjournment) concludes without approval of the Kellogg/Flowers merger from Flowers’ shareholders having been obtained; or if Flowers fails to perform or comply in any material respect with any obligation, agreement or covenant of Flowers to be performed or complied with under the Kellogg/Flowers merger agreement so that Kellogg’s conditions to consummation of the Kellogg/Flowers merger cannot be satisfied;
	•	accuracy of the representations and warranties made by the other party to the extent specified in the merger agreement; and
	•	performance in all material respects by the other party of the obligations required to be performed under the merger agreement at or prior to closing.

  Additional Closing Condition for Kellogg’s Benefit

      Kellogg’s obligation to complete the merger is subject to satisfaction or waiver of the following additional conditions:

	•	receipt of all required consents and approvals of government entities, except for consents and approvals which, if not received, would not have a material adverse effect on Keebler or Kellogg;
	•	the employment agreements with certain members of Keebler’s management, which have already been entered into in connection with the merger must be in full force and effect; and
	•	as of immediately prior to the effective time of the merger, holders of not more than 10% of Keebler’s outstanding shares have taken actions under Delaware law to assert appraisal rights.

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Termination

      Keebler and Kellogg may mutually agree, at any time prior to the completion of the merger, to terminate the merger agreement. In addition, either Keebler or Kellogg may terminate the merger agreement if:

	(1)	the merger has not been completed by June 30, 2001. Neither Keebler nor Kellogg may terminate the merger agreement on this basis, however, if its breach of the merger agreement (or a violation of the voting agreement between Kellogg and Flowers) results in the merger not being completed by this date;
	(2)	there is a permanent legal prohibition, including a final and non-appealable court order or injunction, to the completion of the merger; or
	(3)	the merger agreement is not approved and adopted in accordance with Delaware law by Keebler’s stockholders.

      Kellogg may terminate the merger agreement if:

	(4)	Keebler fails to perform in any material respect any obligation to be performed under the merger agreement, or breaches any of its representations and warranties under the merger agreement, in each case, such that Kellogg’s conditions to closing relating to such failure or breach cannot be satisfied, and such failure or breach is not cured within 15 business days of notice from Kellogg.

      Keebler may terminate the merger agreement if:

	(5)	Kellogg fails to perform in any material respect any obligation to be performed under the merger agreement, or breaches any of its representations and warranties under the merger agreement, in each case, such that Keebler’s conditions to closing relating to such failure or breach cannot be satisfied, and such failure or breach is not cured within 15 business days of notice from Keebler.

      If the merger agreement is validly terminated, it will become void and have no effect, without any liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of that party) to the other party unless such party has willfully breached the agreement. However, the provisions relating to termination fees and expenses and certain other provisions will continue in effect.

Certain Fees and Expenses

      Except as described below, all costs and expenses incurred in connection with the merger agreement and related transactions will be paid by the party incurring such costs or expenses.

  Termination Fees

      Keebler has agreed to pay Kellogg $57.8 million in cash in any of the following circumstances:

	•	the merger agreement is terminated as described in item (3) under “ — Termination” and prior to such termination a third party or Keebler has announced a takeover proposal or a takeover proposal has been made known to Keebler (other than a takeover proposal by Kellogg); or
	•	the merger agreement is terminated as described in item (1) under “ — Termination” without approval of Keebler’s stockholders having been obtained prior to such termination, and prior to June 30, 2001 a third party or Keebler has announced a takeover proposal or a takeover proposal has been made known to Keebler (other than a takeover proposal by Kellogg) and within 12 months after the termination, Keebler enters into an agreement with respect to a takeover proposal or any person acquires beneficial ownership of 50% or more of the outstanding Keebler shares.

Amendments and Waivers

      The parties may amend the merger agreement or waive its terms and conditions before the completion of the merger, but, after Flowers, as controlling stockholder, has approved the merger

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Other Matters

  Financing Of The Merger

      Kellogg has informed us that it has obtained commitment letters in customary form from nationally-recognized lending institutions to provide financing to Kellogg in an amount sufficient, together with Kellogg’s existing credit facilities, cash on hand and other liquid securities, to pay all required amounts under the merger agreement to Keebler stockholders, and to perform its obligations with respect to the transactions contemplated by the Kellogg/Keebler merger agreement and the Kellogg/Flowers merger agreement. There is no financing condition to the closing of the merger.

  Regulatory Matters

      Under the HSR Act and the related rules, the merger may not be completed until notifications have been given, certain information has been furnished to the Federal Trade Commission and the Antitrust Division of the United States Department of Justice and specified waiting period requirements have been satisfied. All of the required notification and report forms under the HSR Act have been filed with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice and the waiting period will expire on December   , 2000 unless earlier terminated. Expiration or termination of the HSR Act waiting period is a condition to the completion of the merger.

  Legal Proceedings

      On July 19, 2000 and July 25, 2000, substantially identical purported class action lawsuits (C.A. Nos. 18159NC (Behrens) and 18175NC (Lewis)) challenging the proposed sale of Keebler by Flowers were filed in the Delaware Court of Chancery by purported stockholders of Keebler against Keebler, Flowers and the following directors of Keebler: Robert P. Crozer, Sam K. Reed, Amos R. McMullian, Jimmy M. Woodward, G. Anthony Campbell, C. Martin Wood, Melvin T. Stith, Johnston C. Adams, Jr. and Wayne H. Pace. The complaints allege, among other things, that Flowers intends to appropriate for itself a premium for its control stake in Keebler to the exclusion of Keebler’s public stockholders, that Flowers intends to effect a transaction that would enable it to capture a disproportionate share of Keebler’s value at the expense of Keebler’s public stockholders, that Flowers intends to insulate itself from liability by causing the Keebler Board to form a special committee of independent directors to approve the transactions and that, by reason of Flowers’ majority stake in Keebler and its ability to elect all of Keebler’s directors, none of the directors can protect the interests of Keebler’s minority stockholders. The complaints seek, among other things, that any sale of Keebler be enjoined or rescinded and that the defendants pay unspecified monetary damages as well as unspecified costs and attorneys’ fees. Both Keebler and Flowers believe that these lawsuits are without merit and intend to defend these matters vigorously.

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      The following is a summary of the material terms of the Flowers voting agreement and is qualified by reference to the complete text of the agreement, which is incorporated by reference and attached as Annex B.

Covenants

      Flowers has agreed to certain covenants in the Flowers voting agreement. The material covenants are as follows:

  Agreement to Vote in Favor of the Keebler Merger

      Flowers has irrevocably agreed, as controlling stockholder of Keebler, to:

	•	execute a written consent in favor of the adoption of the merger and the merger agreement, and each of the transactions contemplated by the merger agreement, and against any takeover proposal or other proposal made in opposition to or competition with the merger and the merger agreement and the transactions contemplated by the merger agreement, against any merger, reorganization, consolidation, share exchange, business combination, sale of assets, recapitalization, liquidation, extraordinary dividend or distribution, significant share repurchase or other similar transaction with or involving Keebler and any party other than Kellogg, and against any other action the consummation of which would reasonably be expected to impede, frustrate, interfere with, impair or delay consummation of the transactions contemplated by the merger agreement; and
	•	deliver such written consent as promptly as permissible by law (which will be the 21st calendar day after the date this information statement is mailed).

      Because Flowers own more than 50% of the outstanding shares of Keebler, no approval by the Keebler public stockholders will be required in connection with the merger. Flowers has also agreed to vote against any competing transaction or proposal.

  Irrevocable Proxy

      Flowers has irrevocably granted to certain officers of Kellogg a proxy, and has appointed them as attorneys-in-fact, to vote all of its Keebler shares in the manner described under “—Agreement to Vote in Favor of the Keebler Merger,” and in their discretion with respect to any postponements or adjournments of any annual or special meeting of Keebler’s stockholders.

  Transfer Restrictions; No Solicitation by Flowers

      Flowers has agreed, among other things, not to transfer or otherwise dispose of any of its Keebler shares during the term of the voting agreement.

      The Flowers voting agreement also prohibits Flowers from soliciting, initiating, negotiating or encouraging a takeover proposal, or negotiating or discussing with or furnishing nonpublic information to any third party regarding such a takeover proposal, in each case other than a takeover proposal made by Kellogg, except as required under Georgia law to carry out its fiduciary duties.

  No Amendments to Certain Agreements

      Flowers has agreed not to:

	•	except with respect to the transactions contemplated by the Flowers merger agreement, amend the Flowers’ rights agreement or take any action with respect to the rights agreements including redemption of the rights or any action to facilitate a third party takeover proposal; or
	•	terminate, amend, modify or waive any provision of any confidentiality or standstill agreement to which it is a party (other than any confidentiality or standstill agreement involving Kellogg).

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      Additionally, Flowers has agreed to use all reasonable efforts to enforce the provisions of any confidentiality or standstill agreement to which it is a party.

Termination

      The Flowers voting agreement will automatically terminate on the earlier to occur of:

	•	the completion of the Keebler merger; or
	•	the termination of the Keebler merger agreement in accordance with its terms.

      The Flowers voting agreement may also be terminated at any time prior to the effectiveness of stockholder approval of the merger agreement by mutual written agreement of Kellogg and Flowers.

      If the Flowers voting agreement is terminated, subject to certain exceptions, its provisions will cease to have effect. The expenses provision, however, will survive any termination.

Certain Fees and Expenses

      All costs and expenses incurred in connection with the Flowers voting agreement and related transactions will be paid by the party incurring such costs and expenses.

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      Under a distribution agreement between Flowers and Flowers Foods, which was executed in connection with the execution of the Kellogg/Flowers merger agreement, Flowers will spin-off to its shareholders shares of stock in a subsidiary of Flowers which was created to hold the assets and liabilities comprising Flowers’ traditional bakery operations and certain other assets and liabilities of Flowers. To this end, Flowers will contribute all of the assets associated with the operations of Flowers Bakeries Brands and Mrs. Smith’s Bakeries to Flowers Foods, Inc., a newly created wholly-owned subsidiary of Flowers, and Flowers Foods will assume the liabilities associated with those assets and certain other liabilities. Flowers will then distribute to its shareholders, in a taxable spin-off, all outstanding shares of Flowers Foods in an amount equal to their proportionate interest in Flowers. As part of the spin-off, Flowers Foods will assume approximately $250 million of Flowers’ debt. Under the distribution agreement, Flowers Foods will not assume approximately $625 million of Flowers’ debt and liabilities and the approximately $75 million of costs associated with the spin-off and the mergers. Following the spin-off, Flowers will have as its principal asset approximately 46.2 million shares of Keebler’s common stock.

      As discussed in more detail below, virtually simultaneously with completion of the spin-off, a wholly-owned subsidiary of Kellogg will merge with and into Flowers. Pursuant to the Kellogg/Flowers merger agreement, the shareholders of Flowers will receive an amount in cash estimated to be approximately $12.50 per share, determined as follows: approximately 46.2 million shares of Keebler stock owned by Flowers multiplied by $42.00 per share, less the approximate $700 million of Flowers debt and transaction expenses not assumed by Flowers Foods; this results in net aggregate payments to Flowers shareholders of approximately $1.25 billion, or approximately $12.50 per outstanding share of Flowers.

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The Kellogg/Flowers Merger Agreement

      The following is a summary of the material terms of the Kellogg/Flowers merger agreement and is qualified by reference to the complete text of the merger agreement, which is attached as Appendix A to Flowers’ proxy statement on Schedule 14A filed in connection with a special meeting of shareholders to be held for the purpose of approving that merger agreement and incorporated by reference in this information statement.

The Kellogg/Flowers Merger

      Under the Kellogg/Flowers merger agreement, a wholly-owned subsidiary of Kellogg will merge with and into Flowers in accordance with Delaware and Georgia law, the separate existence of the merger subsidiary will cease and Flowers will become a wholly-owned subsidiary of Kellogg.

Completion of the Kellogg/Flowers Merger

      After the conditions to completion of the Kellogg/Flowers merger agreement have been satisfied or waived, certificates of merger with respect to that agreement will be filed with each of the Delaware Secretary of State and the Georgia Secretary of State. The Kellogg/Flowers merger will be completed at the time the certificates are filed, or a later time that is set forth in those certificates.

Merger Consideration

      The Kellogg/Flowers merger agreement provides that each share of Flowers common stock outstanding immediately prior to the completion of the Kellogg/Flowers merger (except for shares as to which appraisal rights have been properly exercised) together with the associated right, will, at the completion of the Flowers merger, be converted into the right to receive approximately $12.50 per share, representing the pro rata interest of each such share in the value of Flowers’ 46,197,466 shares of Keebler common stock (or the product of 46,197,466 shares and $42.00 per Keebler share owned by Flowers), less the per share adjustment amount described in the Kellogg/Flowers merger agreement amounting to approximately $700 million in the aggregate, that remainder divided by the number of Flower shares outstanding immediately prior to the effective date of the Flowers merger. However, shares of Flowers held as treasury shares or owned by Kellogg or its subsidiaries will be canceled without any payment for those shares.

Covenants

      Flowers and Kellogg have agreed to certain covenants in the Flowers merger agreement. A description of certain of those covenants follows.

  No Solicitation By Flowers

      Flowers has agreed that it will not, will not permit its subsidiaries to, and will not authorize or permit any of its or its subsidiaries, directors, officers or employees, or any of its or its subsidiaries’ investment bankers, attorneys, accountants or other advisors or representatives to, directly or indirectly:

	•	solicit, initiate, negotiate or encourage, or take any other action knowingly to facilitate any inquiry, proposal or offer relating to or that could be reasonably likely to lead to a takeover proposal (as defined in the Flowers merger agreement) other than a takeover proposal made by Kellogg; or
	•	enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish any person any information relating to, or otherwise cooperate with, any takeover proposal, other than a takeover proposal made by Kellogg; Flowers has also agreed to immediately cease any existing activities, discussions and negotiations with any third party conducted prior to entering into

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		the Flowers merger agreement with respect to any takeover proposal, and request the return of all confidential information it may have provided to such third party regarding Flowers or Keebler.

      However, Flowers may comply with Rule 14e-2(a) of the Securities Exchange Act of 1934 with regard to a takeover proposal, and it may make any disclosure to its shareholders if its outside legal counsel advises it that the failure to make that disclosure would be inconsistent with applicable law, subject to the following. The Flowers Board may, prior to obtaining shareholder approval of the merger:

	•	furnish information about Flowers or its subsidiaries to the person making the takeover proposal if it enters into a confidentiality agreement with that person with terms no more favorable to that person than those of the confidentiality agreement Flowers signed with Kellogg, provided that any information given to that third party has previously been, or is given, at the same time, to Kellogg; and
	•	participate in discussions or negotiations with the person making the takeover proposal if Flowers has given Kellogg prior written notice of its intent to do so,

      only in the following circumstances:

	•	in response to an unsolicited bona fide written takeover proposal that did not result from a breach of the Flowers Board’s obligations with respect to takeover proposals described above and that the Flowers Board reasonably determines in good faith is reasonably likely to lead it to (or to publicly announce that it will) withdraw or modify its recommendation or declaration of the advisability of the Flowers merger agreement or the Flowers merger in a manner adverse to Kellogg or its acquisition subsidiary under the circumstances described below; or
	•	in response to an unsolicited bona fide written takeover proposal that did not result from a breach of the Flowers Board’s obligations with respect to takeover proposals described above and that the Flowers Board reasonably determines in good faith, after consulting with its financial advisors, constitutes a superior proposal (that is, an unsolicited, bona fide and binding written offer from a third party that, if consummated, would result in such third party or its shareholders acquiring, directly or indirectly, more than 50% of Flowers voting power, or substantially all of its consolidated assets, or substantially all of Flowers’ Keebler shares, for consideration that its Board determines in good faith, after consultation with its financial advisors, to be superior from a financial point of view to its shareholders, taking into account also any changes Kellogg may propose to the Flowers merger agreement in response to such proposal or otherwise).

  Flowers Board’s Covenant to Recommend

      The Flowers Board has agreed it will not:

	•	withdraw or modify in any way adverse to Kellogg or its acquisition subsidiary, or propose publicly to do either of these, its recommendation or declaration of advisability of the Flowers merger agreement or the merger, although, prior to obtaining shareholder approval of the merger, Flowers’ Board may effect such an adverse recommendation change if it receives an unsolicited superior proposal (that was not in breach of the Board’s obligations with respect to takeover proposals described above) and believes in good faith after receipt of advice from its outside legal counsel that such action is required by Georgia law to avoid a breach of its fiduciary duties;
	•	adopt or approve a takeover proposal, or recommend or publicly propose to do so, or withdraw or publicly propose to withdraw its approval of the merger;
	•	cause or permit Flowers to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition, merger, option, joint venture or partnership or other agreement related to, intended to or reasonably likely to lead to a takeover proposal, other than a confidentiality agreement with a third party described above; or
	•	agree or resolve to agree to take any of these actions.

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      The Flowers Board has also agreed that it will not make an adverse recommendation change before five business days after receipt by Kellogg of a written notice from Flowers that the Flowers Board has received a superior proposal. This notice will include the terms and conditions of the superior proposal and the name of the person making the superior proposal, and will be repeated for any material amendment. Further, Flowers has agreed that if there is an adverse recommendation change, it will not change the approval by its Board under Georgia law or for the purposes of making any state laws or takeover statutes inapplicable to the transaction, including the merger. Even if the Flowers Board makes an adverse recommendation change, Flowers has agreed to submit the Flowers merger agreement to a vote of its shareholders.

      Additionally, Flowers has agreed to promptly advise Kellogg:

	•	of any request for information that it reasonably believes could lead to, or contemplates, a takeover proposal;
	•	of any takeover proposal it receives, along with a copy of that proposal; or
	•	any inquiry it receives which it reasonably believes could lead to a takeover proposal.

  Rights Agreement

      The Flowers Board has agreed to take all actions reasonably requested in writing by Kellogg to render its stockholder rights plan inapplicable to the transactions contemplated by the Flowers merger agreement. Furthermore, the Flowers Board has agreed not to, without Kellogg’s prior written consent, amend or take any other action with respect to the stockholder rights plan to facilitate a takeover proposal.

  Spin-Off

      Flowers has agreed to use its best efforts to effect the spin-off, and keep Kellogg informed of any developments in the spin-off.

Conditions to the Kellogg/Flowers Merger

  Closing Conditions for Each Party

      The obligations of Flowers and Kellogg to complete the Kellogg/Flowers merger are subject to the satisfaction or waiver of the following conditions:

	•	approval and adoption of the Kellogg/ Flowers merger agreement and the transactions contemplated by it by Flowers’ shareholders as required by Georgia law;
	•	there not being any law, rule, regulation, order, decree or injunction rendering the merger or the other transactions contemplated by the Kellogg/ Flowers merger agreement illegal or otherwise prohibiting completion of the merger or such other transactions;
	•	expiration or termination of applicable waiting periods under the HSR Act;
	•	consummation of the Flowers Foods distribution;
	•	accuracy of the representations and warranties made by the other party to the extent specified in the Kellogg/ Flowers merger agreement; and
	•	performance in all material respects by the other party of the obligations required to be performed under the Kellogg/ Flowers merger agreement at or prior to closing.

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  Additional Closing Condition for Kellogg’s Benefit

      Kellogg’s obligation to complete the Kellogg/ Flowers merger is subject to satisfaction or waiver of the following additional conditions:

	•	receipt of all required consents and approvals of government entities in connection with the consummation of the merger and related transactions, except those consents or approvals which, if not obtained, would not, individually or in the aggregate, have a material adverse effect on Flowers or Kellogg or result in criminal liability or fines;
	•	holders of not more than 10% of Flowers’ outstanding shares have taken actions under Georgia law to exercise their dissenters’ rights; and
	•	the Kellogg/Keebler merger agreement has been approved and adopted by Keebler’s stockholders, and all other conditions to the Kellogg/Keebler merger have been satisfied or waived.

Termination

      Flowers and Kellogg may mutually agree, at any time prior to the completion of the Flowers merger, to terminate the Kellogg/Flowers merger agreement, notwithstanding any approval of the merger agreement by Flowers’ shareholders. In addition, under the same circumstances, either Flowers or Kellogg may terminate the Kellogg/Flowers merger agreement if:

	(1)	the Kellogg/Flowers merger has not been completed by June 30, 2001. Neither Flowers nor Kellogg may terminate the Flowers merger agreement on this basis, however, if its breach of the Flowers merger agreement results in the Kellogg/Flowers merger not being completed by this date;
	(2)	there is a permanent legal prohibition, including a final and non-appealable order or injunction, to the completion of the Kellogg/Flowers merger; or
	(3)	the Kellogg/Flowers merger agreement is not approved and adopted in accordance with Georgia law by Flowers’ shareholders.

      Kellogg may terminate the Kellogg/Flowers merger agreement if:

	(4)	the Flowers Board fails to recommend or withdraws, or modifies in a manner adverse to Kellogg, its approval or recommendation of the Kellogg/Flowers merger agreement or the Kellogg/Flowers merger, or approves or recommends a superior proposal or resolves to do any of these;
	(5)	Flowers fails to perform or comply with in any material respect any obligation, agreement or covenant to be performed or complied by it under the Kellogg/Flowers merger agreement, or breaches any of its representations and warranties under the Kellogg/Flowers merger agreement, in each case, such that Kellogg’s conditions to closing in this respect cannot be satisfied, and such failure or breach is not cured within 15 business days of notice from Kellogg; or
	(6)	the Flowers voting agreement or the Kellogg/Keebler merger agreement is terminated for any reason, or Flowers is in breach of or fails to perform its obligations under either of those agreements.

      Flowers may terminate the Kellogg/Flowers merger agreement if:

	(7)	Kellogg fails to perform or comply with in any material respect any obligation, agreement or covenant to be performed or completed by it under the Flowers merger agreement, or breaches any of its representations and warranties under the Kellogg/Flowers merger agreement, in each case, such that Flowers’ conditions to closing in this respect cannot be satisfied, and such failure or breach is not cured within 15 business days of notice from Flowers.

      If the Kellogg/Flowers merger agreement is terminated in any of these ways, it will become void and have no effect, without any liability of any party (or any stockholder, director, officer, employee, agent,

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      You should be aware that the officers and directors of Keebler and Flowers have interests in the merger and in the Kellogg/Flowers merger (collectively, the “transactions”) that are different from, or in addition to, their interests as stockholders of Keebler generally. The Keebler Board was aware of these interests and considered them, among other matters, in approving the merger, the merger agreement, the Flowers voting agreement and the transactions contemplated by these agreements.

Stock Options

      Keebler’s 1996 Stock Option Plan and 1998 Omnibus Stock Incentive Plan, and agreements provided to option holders under these plans contain change of control provisions that will give rise to accelerated vesting of outstanding unvested options as a result of the transactions. Any Keebler option held by a current or former employee or director that is not exercised before completion of the transactions will be cancelled in exchange for a cash payment, or option spread, equal to the difference between the option exercise price and $42.00.

      The following table shows the number of unvested Keebler options held by Keebler’s executive officers and directors whose vesting will accelerate as a result of the transactions, the number of already vested options and the estimated value of all Keebler options held by such persons.

Deferred Compensation Plan

      Under the Keebler Deferred Compensation Plan, each year participants may defer up to 15% of base salary and bonus reduced by the amount of salary and bonus that is deferred by the participant under Keebler’s Salaried Savings Plan for such year. The Deferred Compensation Plan is intended to provide eligible employees with benefits in excess of those that can be provided under the Savings Plan because of Internal Revenue Code limits. In addition, participants may be credited with matching amounts of up to 50% of the amount of salary and bonus deferred under the Deferred Compensation Plan and Savings Plan that is not in excess of 6% of such compensation, reduced by matching contributions under the Savings Plan. The rate of matching amounts for any year will be determined based on our profitability, in the same manner that the rate of matching contribution for the year is determined under the Savings Plan. Matching amounts become vested in accordance with the same rules as apply to the vesting of matching contributions under the Savings Plan and become 100% vested in the case of death, disability or retirement or upon a change in control. Distributions from the Deferred Compensation Plan are made following the participant’s termination of employment in a lump sum payment or in substantially equal annual installments for up to three years, as elected by the participant prior to the distribution date.

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Keebler Employment and Other Agreements

      Mr. Reed and seven other executive officers of Keebler are parties to termination of employment and change of control agreements, or Employment and Severance Agreements. As described below, Messrs. Reed, Vermylen and Willard entered into new agreements that will replace these Employment and Severance Agreements when the merger takes place. Each such Employment and Severance Agreement provides for the continuing employment of the executive through February 2001 on terms and conditions no less favorable than those in effect before our initial public offering in February 1998. If we terminate the executive’s employment without “cause” or if the executive terminates his own employment for “good reason” (each as defined in the Employment and Severance Agreements) at any time during the term, any interest the executive has in Keebler’s supplemental executive retirement plan will become fully vested and the executive is entitled to receive continued benefits for the remainder of the term of the Employment and Severance Agreement, and in the case of base salary, in no event for less than one year, if such a termination occurs within two years after a “change of control” (as defined in the Employment and Severance Agreements) benefits will continue for two years from the termination. Each Employment and Severance Agreement also provides that at our option, the employee may not compete with our business for a period of up to one year following termination, but if termination is without “cause” or the employee terminates his own employment for “good reason,” we must continue to pay the employee’s annual compensation during such period, counting the payments above. Except for our obligations to make payments to the executive upon a change of control, all obligations under the Employment and Severance Agreements terminate in February, 2001. The transactions will constitute a change of control under the Employment and Severance Agreements.

      Approximately twenty other executives are the beneficiaries of a company policy, or Change of Control Policy, that provides that if the employee is terminated within two years after a “change of control,” if termination is without “cause” or if the employee terminates his own employment for “good reason,” the employee will be entitled to receive continued benefits equal to such employee’s annual compensation (including bonus) and continuation of certain benefits for 12 months. Such Change of Control Policy provides that regardless of a “change of control,” in the event of (i) death, normal retirement or disability of the executive or (ii) termination of such executive’s employment with us without “cause” or for “good reason,” all remaining unvested options under the 1996 Stock Option Plan will immediately vest with the employee. The transactions will constitute a change of control under the Change of Control Policy.

Kellogg Employment Agreements

      Kellogg and we have entered into employment agreements with Sam Reed, David Vermylen and James Willard, that will replace their Employment and Severance Agreements when the merger takes place. Under these agreements:

	•	Mr. Reed will serve as Vice Chairman of Kellogg for a period of one year;
	•	Mr. Vermylen will serve as President and Chief Executive Officer of Keebler, Member of the Kellogg Global Leadership Team and Senior Vice President of Kellogg for a period of three years; and
	•	Mr. Willard will serve as Senior Vice President-Operations of Keebler and Vice President of Kellogg for a period of two years.

Mr. Reed’s agreement provides for an annual base salary of $810,000, a targeted annual bonus equal to 80 percent of the annual base salary and a retention bonus of $4,269,500 to be paid on the first anniversary of the effective time of his agreement. Mr. Vermylen’s agreement provides for an annual base salary of $450,000, a targeted annual bonus equal to 60 percent of the annual base salary and a retention bonus of $1,738,000 to be paid in two equal installments on each of the first and second anniversary of the effective time of his agreement. Mr. Willard’s agreement provides for an annual base salary of $340,000, a targeted annual bonus equal to 60 percent of the annual base salary and a retention bonus of $1,536,800 to be paid

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      The agreements provide for option grants to Mr. Reed, Mr. Vermylen and Mr. Willard of 500,000, 500,000 and 231,200 shares of common stock of Kellogg, respectively. Under each agreement, 50 percent of the executive’s options vest on January 1, 2002 and 25 percent of the executive’s options vest on January 1, 2003 provided that the performance criteria identified in that agreement are satisfied for the prior year. If any of the performance criteria are not achieved for a given year, the options available for vesting in that year will be made available for vesting in the subsequent year. Mr. Willard’s agreement further provides that if the performance criteria for a given year are exceeded, the options that vest that year will be increased on a pro rata basis, with the possibility that all of his options will vest as early as January 1, 2002. Under each of the agreements, all options that have not vested earlier vest on January 1, 2004 regardless of the achievement of the performance provisions, provided that the executive’s employment has not been previously terminated for any reason.

      The agreements also provide that upon termination of employment by Kellogg, other than for Cause (as defined in the agreement) or by the executive for Good Reason (as defined in the agreement), the executive will be entitled to receive: (i) the Annual Bonus Amount (as defined in the agreement); (ii) any retention bonuses not yet paid; (iii) $30,000 in lieu of certain benefits; (iv) continued health and life insurance benefits for two years; (v) continued car allowance for two years and outplacement services for up to one year; (vi) an additional year of service under the executive’s non-qualified retirement plans; and (vii) the executive’s annual base compensation in effect at the time of termination times 1, 2 and 2 for Mr. Reed, Mr. Vermylen and Mr. Willard, respectively.

      Mr. Reed’s agreement generally provides that Kellogg shall offer to enter into, or cause Keebler to offer to enter into, a change-of-control employment agreement with Mr. Reed on the same terms and conditions as other similarly situated executives of Kellogg and its subsidiaries. Mr. Vermylen and Mr. Willard’s agreements also generally provide that Mr. Vermylen and Mr. Willard shall be participants in the Kellogg Change of Control Severance Policy for Key Employees. Each of the agreements contain noncompetition, nonsolicitation and nondisclosure covenants. These covenants generally provide that each executive will not disclose any of our trade secrets or other confidential information at any time, and that during employment and for one year following employment, each executive will not become associated with certain named competitors or seek to employ any of our employees or representatives for a position with a business that is not an affiliate of Keebler or Kellogg.

Indemnification; Directors’ And Officers’ Insurance

      Please refer to “The Merger — Merger Agreement — Covenants — Indemnification and Insurance of Keebler Directors and Officers,” for a discussion of indemnification and insurance rights of the directors and officers.

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      This summary of the material United States federal income tax consequences to Keebler stockholders, other than Flowers, of the merger is based on the law as currently in effect. This summary does not discuss all of the tax consequences that may be relevant to a Keebler stockholder in light of its particular circumstances or to stockholders subject to special rules, such as financial institutions, broker-dealers, tax-exempt organizations, stockholders that hold their Keebler shares as part of a straddle or a hedging or conversion transaction and stockholders who acquired their Keebler shares through the exercise of an employee stock option or otherwise as compensation.

      Keebler stockholders are urged to consult their own tax advisors as to the particular tax consequences to them of the merger, including the effect of United States state and local tax laws or foreign tax laws.

      A United States holder refers to:

	•	a citizen or resident of the United States,
	•	a corporation or other entity created or organized in the United States or under the laws of the United States or of any political subdivision of the United States, or
	•	an estate or trust, the income of which is includible in gross income for federal income tax purposes regardless of its source.

      A Non-United States holder refers to a Keebler stockholder that is not a United States holder.

United States Holders

      The receipt in the merger by a United States holder of cash for Keebler shares will be a taxable transaction for United States federal income tax purposes. A Keebler stockholder that is a United States holder will recognize gain or loss in an amount equal to the difference between the cash received by the stockholder in the merger and the stockholder’s tax basis in the Keebler shares surrendered in the merger. That gain or loss will be a capital gain or loss if the Keebler shares are held as a capital asset by the Keebler stockholder, and will be long term capital gain or loss if the Keebler shares have been held for more than one year at the time of the merger.

      A Keebler stockholder that is a United States holder may be subject to backup withholding at a rate of 31% unless, at the time it surrenders Keebler shares in the merger, it provides its taxpayer identification number and certifies that the number is correct, or unless an exemption is demonstrated to apply. Backup withholding is not an additional tax. Amounts so withheld can be refunded or credited against the federal income tax liability of the United States holder, provided appropriate information is forwarded to the IRS.

Non-United States Holders

      A Keebler stockholder that is a Non-United States holder generally will not be subject to United States federal income tax on any gain realized on a disposition of Keebler shares in the merger unless:

	•	the gain is effectively connected with a trade or business in the United States of that Non-United States holder,
	•	that Non-United States holder is a non-resident alien individual who holds the Keebler shares as a capital asset and who is present in the United States for 183 or more days during the calendar year in which the merger is completed,
	•	that Non-United States holder is subject to tax under the provisions of the Internal Revenue Code on the taxation of United States expatriates, or
	•	Keebler is a “United States real property holding corporation.” Keebler does not believe that it is a United States real property holding corporation.

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      Information reporting and backup withholding imposed at a rate of 31% may apply under specified circumstances to cash payments received in the merger by a Non-United States holder unless, at the time it surrenders Keebler shares in the merger, the Non-United States holder certifies as to its foreign status or otherwise establishes an exemption. Backup withholding is not an additional tax. Amounts so withheld can be refunded or credited against the federal income tax liability of the Non-United States holder, provided appropriate information is forwarded to the IRS.

      Under Section 262 of the Delaware General Corporation Law, or DGCL, if you comply with the conditions established by Section 262, you will be entitled to dissent and elect to have the “fair value” of your shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, judicially determined by the Delaware Court of Chancery and paid to you in cash.

      The following is a summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by certain Delaware case law and the full text of Section 262, a copy of which is provided as Annex D to this information statement. All references in Section 262 and in this summary to a “stockholder” are to the record holder of the shares of Keebler stock as to which appraisal rights are asserted. If you have a beneficial interest in shares of stock held of record in the name of another person, such as a broker or nominee, you will be required to act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect your appraisal rights.

      Under Section 262, where a merger is accomplished by written consent pursuant to Section 228 of DGCL, the corporation, either before or within 10 days after the completion of the merger, must notify each stockholder entitled to appraisal rights of the approval of the merger and that appraisal rights are available and include in the notice a copy of Section 262. We will send you such a notice no more than 10 days after the completion of the merger. At that time, if you wish to exercise your appraisal rights or wish to preserve the right to do so, you should review carefully Section 262 and seek advice of legal counsel, since failure to comply fully with the procedures of Section 262 will result in the loss of appraisal rights.

      YOU ARE NOT PRESENTLY REQUIRED TO TAKE ACTION TO PERFECT YOUR APPRAISAL RIGHTS. THE NOTICE WE WILL SEND TO YOU NO MORE THAN 10 DAYS AFTER THE COMPLETION OF THE MERGER WILL DESCRIBE THE TIMING OF ANY ACTION YOU WILL BE REQUIRED TO TAKE TO PERFECT YOUR APPRAISAL RIGHTS.

      If you wish to exercise the right to dissent from the merger and demand appraisal under Section 262, you will be required to deliver to Keebler a written demand for appraisal of your shares of Keebler stock within 20 days after the date of mailing of the notice of completion of the merger, which demand will be sufficient if it reasonably informs Keebler of your identity and that you intend to demand appraisal of your shares.

      Only a holder of record of shares of Keebler stock issued and outstanding immediately prior to the completion of the merger will be entitled to assert appraisal rights for the shares of stock registered in that holder’s name. A demand for appraisal should be executed by or on behalf of the stockholder of record, fully and correctly, as that stockholder’s name appears on the stock certificates, should specify the stockholder’s name and mailing address, the number of shares of stock owned and that the stockholder intends thereby to demand appraisal of the stockholder’s shares of Keebler stock.

      If your shares of Keebler stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a written demand should be made in that capacity. If your shares of Keebler stock are owned of record by more than one person as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all owners. An authorized agent, including one or more joint owners, may execute a demand for appraisal on behalf of a stockholder; however, the agent must

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      A record holder such as a broker who holds shares of Keebler stock as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of Keebler stock held for one or more beneficial owners while not exercising those rights with respect to the shares of Keebler stock held for one or more other beneficial owners; in that case, the written demand should set forth the number of shares of Keebler stock as to which appraisal is sought, and where no number of shares is expressly mentioned, the demand will be presumed to cover all shares of Keebler stock held in the name of the record owner. If you hold your shares of Keebler stock in brokerage accounts or other nominee forms and wish to exercise appraisal rights, you are urged to consult with your broker to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

      Within 120 days after the completion of the merger, but not thereafter, either Keebler or any holder of dissenting shares of Keebler stock who has complied with the requirements of Section 262 may file a petition in the Delaware Chancery Court demanding a determination of the fair value of all shares of Keebler stock held by dissenting stockholders. Keebler is under no obligation to and has no present intent to file a petition for appraisal, and you should not assume that Keebler will file a petition or that Keebler will initiate any negotiations with respect to the fair value of the shares. Accordingly, if you desire to have your shares appraised, you should initiate any petitions necessary for the perfection of your appraisal rights within the time periods and in the manner prescribed in Section 262.

      Within 120 days after the completion of the merger, any stockholder who has complied with the provisions of Section 262 will be entitled to receive from Keebler, upon written request, a statement setting forth the aggregate number of shares of Keebler stock for which demands for appraisal have been received by Keebler and the aggregate number of holders of the shares. Keebler must mail this statement to the stockholder within 10 days of receipt of a request or within 10 days after the expiration of the period for the delivery of demands as described above, whichever is later.

      Within 120 days after the effectiveness of the merger, any Keebler stockholder complying with Section 262 and who is otherwise entitled to appraisal rights may file a petition in the Delaware Chancery Court demanding a determination of the value of the stock of all such holders. A stockholder timely filing a petition for appraisal with the Delaware Chancery Court must deliver a copy to Keebler, which will then be obligated within 20 days to provide the Delaware Chancery Court with a duly verified list containing the names and addresses of all stockholders who have demanded appraisal of their shares of Keebler stock and with such stockholders agreements as to the value of their Keebler shares have not been reached with Keebler. After notice to the stockholders, the Delaware Chancery Court is empowered to conduct a hearing on the petition to determine which stockholders are entitled to appraisal rights. The Delaware Chancery Court may require stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the requirement, the Delaware Chancery Court may dismiss the proceedings as to that stockholder.

      After determining the stockholders entitled to an appraisal, the Delaware Chancery Court will appraise the “fair value” of their shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. The costs of the action may be determined by the Delaware Chancery Court and taxed upon the parties as the Delaware Chancery Court deems equitable. Upon application of a holder of dissenting shares of Keebler stock, the Delaware Chancery Court may also order that all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all of the shares of Keebler stock entitled to appraisal.

      IF YOU CONSIDER SEEKING APPRAISAL, YOU SHOULD BE AWARE THAT THE FAIR VALUE OF YOUR SHARES AS DETERMINED UNDER SECTION 262 COULD BE MORE THAN, THE SAME AS OR LESS THAN THE MERGER CONSIDERATION YOU WOULD

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      In determining fair value and, if applicable, a fair rate of interest, the Delaware Chancery Court is to take into account all relevant factors. In WEINBERGER V. UOP, INC., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. In WEINBERGER, the Delaware Supreme Court further stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.”

      Any stockholder who has duly demanded appraisal in compliance with Section 262 will not, after the completion of the merger, be entitled to vote the shares subject to this demand for any purpose or to receive payment of dividends or other distributions on those shares (except dividends or other distributions payable to holders of record of shares as of a record date prior to the completion of the merger).

      If any stockholder who demands appraisal of shares of Keebler stock under Section 262 fails to perfect, or effectively withdraws or loses, the right to appraisal, the stockholder’s shares of Keebler stock will be converted into the right to receive the merger consideration in cash in accordance with the merger agreement, without interest. A stockholder will fail to perfect, or effectively lose or withdraw, the right to appraisal if no petition for appraisal is filed within 120 calendar days after the completion of the merger. A stockholder may withdraw a demand for appraisal by delivering to Keebler a written withdrawal of the demand for appraisal and acceptance of the merger consideration, except that any such attempt to withdraw made more than 60 calendar days after the completion of the merger will require the written approval of Keebler. Once a petition for appraisal has been filed, the appraisal proceeding may not be dismissed as to any stockholder, absent approval of the Delaware Chancery Court.

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Security Ownership of Management

      The following table sets forth certain information, as of November 14, 2000, regarding the beneficial ownership of Keebler common stock by each director of Keebler, by each of the five most highly compensated executive officers of Keebler (as required by SEC rules) and by all directors and executive officers of Keebler as a group. Most of these individuals have the opportunity to become the beneficial owners of additional shares of Keebler common stock as a result of stock options vesting or becoming exercisable, as described under “Interests of Officers and Directors in the Transactions.” Otherwise, except as noted, the persons named in the table below do not own, beneficially or of record, any other securities of Keebler or its subsidiaries and have sole voting and investment power over all securities for which they are shown as beneficial owner.

	(1)	With respect to Keebler, shares beneficially owned and percentage of ownership are based on 90,202,998 shares of outstanding Keebler common stock and exercisable stock options as of November 14, 2000.
	(2)	Of the total shares and options held by Mr. Reed, 1,953,753 shares and options are held by The Sam K. Reed and Victoria P. Reed January 19, 1995 Inter Vivos Trust of which Mr. Reed and his wife are trustees, 34,310 shares are held by the Reed Family Trust of which Thomas E. O’Neill and Mr. Reed’s wife are trustees, and 62,375 shares are held by the Sam and Victoria Reed Charitable Remainder Unitrust of which Mr. Reed and The Northern Trust Company are trustees. Includes 1,261,175 shares subject to stock options that are currently exercisable; excludes 278,388 shares subject to stock options that are not exercisable within 60 days.
	(3)	Mr. Vermylen’s shares and options are held by the David B. Vermylen Declaration of Trust dated August 22, 1997 of which Mr. Vermylen is trustee. Includes 227,240 shares subject to stock options that are currently exercisable; excludes 81,941 shares subject to stock options that are not exercisable within 60 days.
	(4)	Includes 206,746 shares subject to stock options that are currently exercisable; excludes 79,110 shares subject to stock options that are not exercisable within 60 days.
	(5)	Includes 160,757 shares subject to stock options that are currently exercisable; excludes 73,449 shares subject to stock options that are not exercisable within 60 days.

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	(6)	Mr. Willard’s shares and options are held by the James T. Willard Living Trust dated October 14, 1998 of which Mr. Willard and his wife are co-trustees. Includes 210,757 shares subject to stock options that are currently exercisable; excludes 73,449 shares subject to stock options that are not exercisable within 60 days.
	(7)	A director and executive officer of Flowers Industries, Inc.
	(8)	Includes 8,550 shares subject to stock options that are currently exercisable.
	(9)	Of the total shares held by Mr. Adams, 300 are held by the Palmer Scott Adams Trust, 300 are held by the Alexandra Power Adams Trust and 300 are held by the Tucker Kirk Adams Trust.

(10)	A director of Flowers Industries, Inc. Of the total shares held by Mr. Burke, 1,000 are held by Mr. Burke’s wife and 1,000 shares are held by the Franklin L. Burke IRA.
(11)	Includes 1,050 shares subject to stock options that are currently exercisable.
(12)	An executive officer of Flowers Industries, Inc.
(13)	Includes 2,536,173 shares subject to stock options that are currently exercisable; excludes 707,963 shares subject to stock options that are not exercisable within 60 days.

Security Ownership of Certain Beneficial Owners

      The following table sets forth certain information, as of November 14, 2000, regarding the beneficial ownership of persons known to Keebler to be the beneficial owners of more than 5% of any class of Keebler’s voting securities. The information was obtained from Keebler records and information supplied by the stockholders, including information on Schedule 13G. Except as otherwise noted, the persons named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them.

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      Keebler files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information Keebler files at the SEC’s public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at “http://www.sec.gov.”

      The SEC allows Keebler to “incorporate by reference” information into this information statement, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this information statement, except for any information superseded by information in, or incorporated by reference in, this information statement. This information statement incorporates by reference the documents set forth below that Keebler has previously filed with the SEC. These documents contain important information about Keebler and our finances.

      We are also incorporating by reference additional documents that we file with the SEC between the date of this information statement and the date that Flowers acts by written consent to approve the merger.

      If you are a Keebler stockholder, we may have sent you some of the documents incorporated by reference, but you can obtain any of them through us or the SEC. Documents incorporated by reference are available from us without charge, excluding all exhibits unless we have specifically incorporated by reference an exhibit in this information statement. Stockholders may obtain documents incorporated by reference in this information statement by requesting them in writing or by telephone from Keebler at the following address:

Keebler Foods Company

      If you would like to request documents from us, please do so by            , 2001.

      YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS INFORMATION STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS INFORMATION STATEMENT. THIS INFORMATION STATEMENT IS DATED             , 2001. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE INFORMATION STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND THE MAILING OF THIS INFORMATION STATEMENT TO STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.

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ANNEX A

DATED AS OF

OCTOBER 26, 2000

AMONG

KEEBLER FOODS COMPANY,

KELLOGG COMPANY

AND

FK ACQUISITION CORP.

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